InvestorQ : Is it true that the home loan borrowers will benefit from the monetary policy and how?
Khushi Patel made post

Is it true that the home loan borrowers will benefit from the monetary policy and how?

Answer
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Dhwani Mehta answered.
3 weeks ago


The monetary policy announcements also had some positive cues for home loan borrowers. RBI has rationalised risk weights and linked them to Loan-to-Value ratios or LTV for new home loans sanctioned up to March 31, 2022.

According to the RBI, the new LTV system will lead to higher credit flow to the real estate sector. In addition, the home loans will also become accessible and more competitive for the customers. Let us quickly understand how it benefits home loan borrowers.

LTV ratio or the loan-to-value ratio refers to the proportion of the property value that a lender can borrow through a loan. It is the other part of the margin money brought in by the homeowner. LTV ratio is set for a loan applicant after factoring in his credit profile.

If a bank underwrites loan for an apartment worth Rs.1 crore assuming that the homeowner brings in Rs.20 lakhs, then the loan amount will be Rs.80 lakhs and the LTV ratio will be 80%. The risk weights will be linked to the LTV making it more meaningful for the realty sector.