Understanding loan to value under new RBI norm
The Reserve Bank of India has brought about many new directives and guidelines in order to curb speculation in the property market as the sector stands poised for a revival post recession recovery. One of the guidelines that has dampened the mood of real estate developers as well as prospective home buyers is the exclusion of stamp duty, registration fees and all other allied charges while calculating the loan to value when taking a home loan.
Understanding the loan to value
Simply stated the loan to value (LTV) is the ratio of the amount that you wish to borrow for a home to the actual value of the home. The LTV can be calculated from the actual worth of the home, the mortgage being taken and the down payment that has been made prior to the loan. For example, the value of a house is R40,00,000 and a down payment of R400,000 has been made a loan of the balance amount that is R36,00,000 is being sought. In this case the LTV comes to be R36,00,000 of the actual value of R40,00,000, which works out to 90%. Thus the LTV is 90%.
What the new RBI guidelines imply
This guideline implies that the borrowers will now have to pay a higher amount from their resources as the loan that can be approved by the banks will be reduced by
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