Definition
Loan-to-Value Ratio (Home Loan)
The loan-to-value (LTV) ratio is the proportion of a property's value that a lender is willing to finance through a home loan, with the rest funded by the buyer's down payment.
If a lender offers a high LTV, you borrow more and put down less; a lower LTV means a larger down payment from your own funds. Regulators cap the maximum LTV (it tends to be lower for higher-value properties), and the cap typically excludes stamp duty and registration charges, which the buyer must usually fund separately.
A lower LTV reduces your loan, interest cost and risk, while a higher LTV preserves cash but increases borrowing and EMIs. Buyers should budget for the down payment plus the stamp duty and registration charges that the loan will not cover, and consider how the LTV affects affordability and eligibility.
Related terms
- Stamp Duty and Registration ChargesStamp duty and registration charges are state government levies paid when buying property — a transaction tax plus a fee for officially recording the transfer.
- Loan-to-Value Ratio (Home Loan)The loan-to-value (LTV) ratio is the proportion of a property's value that a lender is willing to finance through a home loan, with the rest funded by the buyer's down payment.
- EMIAn EMI (equated monthly instalment) is the fixed monthly payment a borrower makes to repay a loan, comprising both interest and a portion of the principal.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.