While determining the principal amount of the home loan that can be provided to a person, not just the eligibility of the person is taken into account. There are other factors such as the value of the property that plays a part in the calculation of the home loan. Usually, 75% to 90% of the property value is covered under the home loan. The percentage depends upon the features of the property along with the financial condition of the home buyer.
What is LTV?
LTV or loan to value is the ratio of loan that can be provided and the value of the property. If the LTV is higher, then one needs to pay a lower down payment. Though, with a lower down payment, one will have to pay up higher amounts of EMIs. If the LTV is lower, then the amount of down payment will significantly increase. Thus, the EMIs under a lower LTV are lower as well.
If the LTV is higher, then you will have to pay a higher interest rate to the loan provider through EMIs. If you have enough funds and are financially capable, then it is better to opt for a higher down payment and a shorter tenure. Such options can ensure that you do not have to pay a higher interest rate throughout the tenure of the home loan.
What is an appropriate LTV?
One should determine the LTV that will be most suitable for them to make sure that they can afford to pay the EMIs throughout their tenure without missing a payment. Using a home loan EMI calculator can help you make a pin-pointed decision.
It is better for people who do not have enough funds for a large amount of down payment to choose a higher LTV. Though, they should consider all the plans and interest rates offered by different home loan providers. The interest rate they pick should be appropriate so that they can manage to pay the EMIs in the least amount of time possible.
If you have to go for a higher LTV, then ensure that you pick a plan with the lowest home loan interest rate. Also, as the tenure passes by, make sure that you look for opportunities for prepayment of the EMIs to decrease the tenure of the plan and along with it, the interest rate that you have to pay. PNB Housing Finance Ltd provides a loan tenure of upto 30 years and provides funding upto 90% of the property cost.
Factors Considered while Calculating LTV
- Income: The bank or home loan provider considers your current financial condition. If you have a high income, then banks will be willing to sanction your home loan.
- Age: People falling under the age group of 30 to 45 years have the highest chance of getting the loan sanctioned easily. The loan eligibility is in your favour if you have more time to repay the loan.
- Liabilities: The home loan EMI calculator takes your total liabilities into account as well. If you have too many loans to repay, you will not get a home loan easily.
- Credit history: Having a positive and good credit history ensures that you get a home loan easily. With a good credit history, you can even get the lowest home loan interest rate.
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