What is the LTV Calculation Formula?
Depending on the lender’s policy, the maximum LTV for a particular applicant is determined. This LTV is then multiplied with the current appraised value of the property to determine the maximum loan amount that can be offered against it.
Thus, if the lender’s LTV ratio calculator has set the LTV for 70%, and the value of the property is INR 1 crores, then as per the LTV calculation formula
Max. loan amount = LTV * Appraised value of the property
Thus, for the above example, the maximum amount that can be borrowed against the property is INR 70 lakhs.
Factors That Affect LTV Calculation:
Certain factors affect the LTV ratio and vary from person to person. LTV is higher or lower based on:
- Residential property vs Commercial Property: The LTV ratio is on a general basis higher for commercial properties versus residential properties.
- Occupied Properties vs Vacant properties: Occupied properties have higher LTV ratios than vacant properties. Self-occupied properties have still higher LTR than rented out properties. This is for residential as well as commercial properties.
- Age of the Property: Newer properties tend to get a higher LTV when compared to older ones.
- Location: If the property is located at a prime location, then the chances of a higher LTV are more.
NOTE: This page only talks about LTV calculation and the factors that affect it. The calculator shows the maximum loan amount one may be eligible for based on LTV as well as net monthly disposable income. However, please note that eligibility of the applicant in terms of employment history, income, current monthly income credit score, etc. are also taken into account while determining the maximum loan amount that can be given.