Home Loan: Is it possible to get a home loan for 100% of the property value? What are the RBI regulations?

Every person dreams of owning their own home. But when it comes to buying a house, very few people can afford to pay the entire amount upfront. Even those who have the money often prefer to take advantage of affordable home loans. In other words, you'll rarely find someone who buys a house without a home loan.

Now, since taking a home loan is almost inevitable when buying a house, the question arises: how much loan can you actually get? Can you get a 100% loan for buying a house, just like for other things? This is a question that crosses many people's minds. To understand how much of a home loan you can get, you need to know the rules of the Reserve Bank of India (RBI).

First, let's understand what the Loan-to-Value (LTV) ratio is.

The Loan-to-Value (LTV) ratio means the percentage of the total property value that a bank or financial institution can lend you. The remaining amount has to be paid by you as a down payment. Whether you pay this down payment from your savings, by taking a personal loan, or by borrowing from someone, is entirely up to you.

What are the RBI rules regarding home loans?
To make home loans more accessible, the RBI has set certain LTV limits. If your property is valued up to ₹30 lakh, banks can sanction a maximum loan of up to 90%. If the property value is between ₹30 lakh and ₹75 lakh, you can get a loan of up to 80%. If the property is worth more than ₹75 lakh, you can get a loan of up to 75%.

Several other charges also apply.
It's important to note that these LTV limits do not include stamp duty, registration, and documentation charges. These expenses have to be paid separately, which increases the initial cost. So, if you are planning to buy a house by only arranging for the down payment, remember that you will also incur expenses for registration, etc., so make sure you have the funds for that as well.

So why don't banks give 100% loans?
Even if the home loan amount is relatively small, it's still a significant sum. Let's say you buy a house for just 30 lakh rupees; even though it might seem like a small amount, it's a large sum of money. If the value of your property depreciates even slightly, the bank might face difficulties in recovering the loan. This could lead to losses for the bank, ultimately increasing non-performing assets (NPAs). This may be why the Reserve Bank has set limits on home loans.

Is there any other way to get a 100% home loan?
While you won't get a 100% home loan, you can still fully finance your home using other methods. You can take a small personal loan along with your home loan to cover the down payment. However, you should keep in mind that personal loans have significantly higher interest rates. You could also consider taking a gold loan.

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