When you apply for a home loan, the most confusing part is understanding how much money the bank will actually sanction.
Many people think that if their flat costs fifty lakh, the bank will just give a loan of fifty lakh. Nope! This never happens.
Banks follow a simple rule called the Loan-to-Value Ratio, or LTV.
LTV is the single biggest factor that decides your actual loan amount, your down payment, your interest rate, and even whether your loan gets approved at all.
It’s shocking when the bank’s property valuation comes in low, or when two different banks give different loan amounts for the exact same house.
This happens because every bank uses its own twist on the LTV policy and valuation method.
In this guide, we’ll explain exactly what LTV means, how banks calculate it with real-life numbers, why LTV changes for different types of properties, and how you can increase your chances of getting the maximum loan.
Everything is written in super simple language so you can tackle the process like a pro!
What Is LTV in Home Loans?
Simple Meaning of Loan to Value Ratio
The LTV is just the percentage of the property’s value that the bank is ready to fund as a loan.
Think of it as the bank saying, “We trust the property is worth X, and we are willing to put up Y% of X, but you, the borrower, must pay the remaining Z%.”
This is how banks reduce their risk. They never finance the full cost they always keep a margin (your down payment) so that if you default, they can sell the property and easily recover their money.
The LTV Formula Used by All Banks
All banks use this basic calculation to figure out the ratio:
Example: Let’s say the Property Value used by the bank is ₹60 Lakh, and the bank sanctions ₹48 Lakh as the loan.
LTV Calculation: $(\frac{48,00,000}{60,00,000}) \times 100 = 80\%$
Your Down Payment: 20% (₹12 Lakh)
Pro Tip: Even if your agreement shows ₹65 Lakh, the bank will only base its LTV calculation on the value it decides (which is often the lower figure). We’ll dive into that next!
How Banks Calculate LTV in Real Life (The Two-Value Test)
This is where the confusion starts! Banks are smart; they don’t blindly trust the price written on your sale agreement.
The Two Values Banks Always Compare
The bank will always determine the LTV based on the LOWER of these two figures:
- The Sale Agreement Value (The Price You Pay): The price mentioned in your legal document with the seller.
- The Bank Valuation Report: The value assessed by the bank’s independent, certified property valuer.
The lower figure is what the bank calls the “eligible property value” and becomes the base for calculating LTV.
Example:
- You agree to buy a flat for ₹70 Lakh (Agreement Value).
- The bank sends its valuer, and the report comes back at ₹62 Lakh (Bank Valuation).
- The bank ignores the ₹70 Lakh figure and calculates LTV based on ₹62 Lakh.
If the maximum LTV allowed is 80%:
Maximum Loan Sanctioned: ₹62 Lakh $\times$ 80% = ₹49.60 Lakh
The Shock: You expected a loan around ₹56 Lakh (80% of ₹70 Lakh), but the bank only sanctioned ₹49.60 Lakh. You now have to suddenly arrange an extra ₹6.40 Lakh for your down payment! This happens every day.
Different LTV Limits for Different Loan Amounts
RBI Rules (Practical View for 2025)
The RBI sets the maximum LTV caps to keep the entire lending system stable. Banks cannot legally cross these limits, no matter how good your profile is.
Here is the breakdown of the current maximum LTV slabs:
| Property Value / Loan Amount Bracket | Maximum LTV Allowed | Your Minimum Down Payment |
| Up to ₹ 30 Lakh | 90% | 10% |
| > ₹ 30 Lakh up to ₹ 75 Lakh | 80% | 20% |
| > ₹ 75 Lakh | 75% | 25% |
Example:
If your property is valued at ₹1 Crore, the bank can give a maximum of 75% LTV, which means the loan limit is ₹75 Lakh. Even if your income is super strong, the bank is restricted by this RBI limit and cannot cross ₹75 Lakh.
LTV Variations for Different Types of Home Loans
The LTV percentage is a function of risk. The riskier the asset is to sell later, the lower the bank’s willingness to fund it.
LTV for New Flat Purchase
Generally Higher LTV: Banks are most comfortable here. If the builder is reputed, the bank’s valuation will usually match the agreement value.
Real Example: A new flat in a branded project costing ₹60 Lakh will likely get a loan of ₹48 Lakh (80% LTV).
LTV for Resale Flats (Older Buildings)
Lower Effective LTV: Banks apply depreciation. Even if a 25-year-old resale flat is priced at ₹75 Lakh, the bank’s valuer might only value it at ₹60 Lakh due to age and condition.
Real Example: If LTV is 80%, the loan amount is based on ₹60 Lakh $\times$ 80% = ₹48 Lakh (not ₹60 Lakh, which you might have expected from the price).
LTV for Plot Purchase Loans
Lowest LTV: Land value fluctuates and is harder to liquidate, so banks are very conservative.
LTV Cap: Banks usually cap LTV for plots at 60% to 70%.
Real Example: If a plot is valued at ₹40 Lakh, the maximum loan is only between ₹24 Lakh and ₹28 Lakh.
LTV for Home Construction Loans
Complex Valuation: Banks split the LTV calculation between the land value and the approved construction cost (which they release in phases). They apply LTV to the combined total.
Real Example: If your land is valued at ₹40 Lakh and the approved construction cost is ₹20 Lakh (Total ₹60 Lakh). With 80% LTV, you get ₹48 Lakh, which is disbursed progressively as construction milestones are met.
LTV for Balance Transfer Home Loans
Fresh Valuation is Key: Before a transfer, the new bank does a fresh valuation. They check your outstanding loan against the current property valuation.
Real Example: If your current outstanding loan is ₹50 Lakh but the new bank only values the property at ₹60 Lakh, your LTV is 83.33%. Many banks will reject this, as it is higher than their usual 75%-80% threshold for balance transfers.
Conclusion
LTV is the single most important factor controlling your loan amount. When you understand how banks calculate LTV and how valuations work, you can do two major things:
- Plan your down payment accurately and avoid last-minute panic.
- Choose the best bank that gives the maximum eligible loan amount for your specific property.
With proper guidance and the correct documentation, you can improve your eligibility, maximize your sanction value, and secure a smooth home loan approval.
Ready to take Home Loan correctly?
If you want the maximum loan amount for your home loan or balance transfer and need guidance on getting the highest possible LTV, Adiguru Financial Services can help you compare banks, understand valuation reports, and secure the right lender for your profile.
📞 Call us now: +91 886 652 9124 | +91 989 840 9871
📧 Email: info@adigurufinancialservices@gmail.com
🌐 Website: www.adigurufinancialservices.com
We help with new home loans, resale home loans, mortgage loans, plot loans, construction loans, and refinancing with complete transparency.
FAQs
What is LTV in a home loan?
LTV is the percentage of your property value that the bank agrees to finance as a loan.
Does a higher LTV mean a higher loan amount?
Yes, because a higher LTV ratio means the bank funds more, directly reducing your cash down payment.
Can banks give more than 90% LTV?
No, RBI rules strictly prohibit banks from crossing the maximum LTV limits set for each value slab.
Why does bank valuation often come lower than the agreement value?
Banks use market comparisons and apply depreciation, whereas the agreement value includes the buyer/seller premium and negotiation.
Does property age affect LTV?
Yes, older buildings reduce the bank’s valuation due to depreciation, which directly reduces the eligible loan amount.
Why do different banks give different LTV amounts for the same house?
Each bank uses its own approved valuer and has slightly different internal risk policies, leading to varied valuations and sanctioned loan amounts.
Can I increase the loan amount by adding a co-applicant?
Yes. You don’t increase the LTV percentage, but the co-applicant’s income ensures you meet the income eligibility for the maximum loan amount allowed by the LTV.
Does the CIBIL score impact LTV?
Yes, a low CIBIL score can make banks classify your profile as high-risk, leading them to internally reduce the maximum LTV they offer you (e.g., from 80% to 75%).
How is LTV calculated for construction?
Banks calculate LTV on the land value plus the approved construction cost, not just your entire estimated budget.
Can a Balance Transfer be rejected due to LTV?
Yes, if the outstanding loan amount is too high compared to the current valuation done by the new bank, the LTV is unfavourable and the transfer may be rejected.
Add a Comment