While you are taking a loan, your calculation of your eligibility is always one of your biggest concerns. The idea of loan-to-value (LTV) ratio will enable you to understand the level of financing which you are eligible for, and also help you coordinate with your fiscal obligation in the most advantageous way. LTV calculator is a simple tool that will make the process easy for you and help you verify loan eligibility on property price and your probable down payment. It is suggested if you are to take money from property, then applying the LTV calculator together with an EMI calculator for loan against property can provide you with all information about your affordability as well as repaying tenure. Let us know how to apply the tools effectively.
What is an LTV Calculator?
LTV calculator is either a PC software or internet application that calculates the percentage of loan to value of your borrower. LTV percentage is one of the major tools that lenders utilize to evaluate the risk of your loan request. It determines the correlation between the loan amount and the market value of your collateral, your home in this context.
For instance, if your property for which you want to mortgage is worth ₹50 lakh and you want to avail ₹25 lakh as a loan, then your LTV ratio would be 50% (₹25 lakh/₹50 lakh).
Why is LTV Ratio Important?
Borrowers would generally apply the LTV ratio to determine how safe the loan is. The lower the LTV ratio, the safer for the lender because you are providing more or a better quality of collateral, reducing the likelihood of default. The higher the LTV, the riskier for the lender. Banks and other lending institutions will maintain acceptable maximum ratios of LTV by asset and by loan type.
For mortgages on property, LTVs are 50-75% depending on the lender. Therefore, knowing how much of your asset value is valuable to borrow is a loan planning requirement.
How to Use an LTV Calculator
An LTV calculator simplifies the calculation because you don’t need to do any hand calculations. This is the step-by-step process:
1. Input Property Value
You will then enter your property value which you will be providing as a collateral. Enter the current valuation with care so that it will be accurate.
2. Enter Desired Loan Amount
Thirdly, you will enter the loan amount that you will be seeking a loan for. It may be based on your needs in finance or finance value which will be provided to you.
3. Determine Your LTV Ratio
Your LTV ratio is computed automatically by using the calculator, where you divide the loan value by the property value and then multiply it by 100 to express it as a percentage.
Example:
- Property Value = ₹60 lakh
- Loan Amount = ₹30 lakh
- LTV Ratio = (₹30 lakh / ₹60 lakh) × 100 = 50%
This is an approximation that allows you to observe how much more you are from the lender’s highest acceptable LTV ratio. If you have an LTV ratio greater than one that your lender will support, then you will need to reduce the amount of the loan or put up more collateral.
Steps to Calculate Loan Eligibility using an LTV Calculator
1. Value Property
An approximation of the property to establish its worth as of today. This becomes your basis for calculation.
2. Calculate Desired Loan Amount
Do you remember how much you are going to need in terms of finance against financial targets, with plenty of space for a possible down payment.
3. Compare with Lender Guidelines
Use the LTV calculator to calculate the LTV and compare the resulting ratio to lender eligibility guidelines. Lenders tend to visibly state their LTV percentages in their lending terms for your benefit.
4. Adjust Funding Needs
In case your LTV ratio is too high, be ready to put up more monetary funds in the expectation of bringing the ratio to reasonable proportions.
5. Last Loan Amount
After fulfilling the lender’s LTV requirement, fill in the last loan amount and continue with application procedures.
Using a Loan Against Property EMI Calculator for Repayment Details
Know how much you can borrow against yourself is half the job. Half the job is knowing how much you can repay. The best weapon to help you calculate your equated monthly installments (EMIs) based on the loan amount, tenor, and rate of interest is a loan against property EMI calculator.
How it works:
1. Input Loan Amount
Enter the loan amount after ascertaining eligibility with the LTV calculator.
2. Select Tenure
Select the tenure of the loan in accordance with your repayment capability. The longer the tenure, the lower the EMIs but the greater the total interest outgo.
3. Enter Interest Rate
Enter the percentage rate of interest charged on your loan, as given by your lender.
Your EMI amount will be easily computed by the calculator, which you can append to your monthly expenses without getting into debt.
Benefits of an LTV Calculator and an EMI Calculator
1. Fast Results
Both calculators give fast results, which save time and effort.
2. Improved Planning with Accurate Figures
They do not allow hand-made mistakes and provide you with accurate figures, thus planning money better.
3. Comparison
You are able to compare different loan scenarios by varying loan amounts, property prices, rates of interest, or tenures.
4. Decision-Making
With the LTV Calculator and the loan against property EMI calculator, you have the clear picture of your borrowing capacity and a repayment burden.
Final Thoughts
LTV calculator is a convenient gadget for those who desire finance on the basis of collateral, i.e., finance against property. In addition to the calculation of loan eligibility, it also stops you from availing a loan higher than the lenders’ value. With a loan against property EMI calculator in hand, you can prepare a repayment schedule according to your income and expenses.
