1. Down payment is your contribution
If an asset costs ₹10 lakh and the lender finances ₹8 lakh, you fund the remaining ₹2 lakh plus any costs not financed by the lender.
Tip: Down payment reduces the amount borrowed.
2. LTV compares loan with collateral value
A loan of ₹8 lakh against an accepted collateral value of ₹10 lakh has a simple LTV of 80%. Regulatory limits and lender policies can cap LTV depending on the product.
Tip: LTV = loan ÷ accepted collateral value.
3. Purchase price and lender valuation can differ
If the lender values the property below your agreed purchase price, your required cash contribution can be higher than expected.
Note: Do not commit every rupee before understanding lender valuation.
4. More down payment reduces debt but uses liquidity
A larger down payment lowers borrowing, but putting all available cash into the asset can leave no emergency reserve.
Tip: The best down payment is not always the maximum possible.
5. Quick check
₹80 lakh loan against ₹1 crore accepted value. What is the simple LTV?
Answer: C - ₹80 lakh divided by ₹1 crore is 80%.