Loan to value ratio of 90% for home loans in the offing

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Loan to value ratio of 90% for home loans in the offing
National Housing Bank (NHB), the authority governing the functioning of Housing Finance Companies (HFCs) in India, is mulling over the proposal to increase the loan to value ratio or LTV ratio from the current threshold of 80% to 90% for home loans of ticket size over Rs. 20 lakh that are backed by a mortgage guarantee. The mortgage guarantee cover protects against any risk default on the part of the borrower.

For going ahead with the proposal, the regulator is considering discussion with the Reserve Bank of India. As quoted in the Economic Times Report, RV Verma, Chairman and Managing Directoir of NHB iterated "We will discuss the matter of increasing LTV (loan-to-value) ratio for loans that carry mortgage guarantee cover from companies registered with the RBI".

If the RBI grants a go ahead to the proposal of NHB, home loan borrowers will be able to secure 90% of the property value as home loan i.e. for a property worth Rs. 50,00,000, the lenders in the would now disburse a maximum of Rs. 45,00,000 as against the previous grant of Rs. 40,00,000.

Story first published: Thursday, April 3, 2014, 12:09 [IST]
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