Why Banks Won't Give You 80% LTV on a Vacation Home (2025 Reality)

The math for buying a primary residence in Delhi or Mumbai is simple:

• Price: ₹1 Cr.
• Bank Funds: 80% (₹80L).
• You Pay: 20% (₹20L) + Stamp Duty.

When you take this math to a vacation market like Goa, Dehradun, or Kasauli, the deal often falls apart at the sanction letter stage.

Why? Because Loan-to-Value (LTV) is not just a regulatory limit; it is a risk assessment. And in the eyes of a bank, your "Dream Villa" is a "High-Risk Asset."

Here is the financing reality for Second Homes in 2025.

The RBI Norms vs. Second Home Reality

On paper, RBI guidelines for 2025 allow the following LTV caps based on loan amount:

• Loans <₹30 Lakhs: Up to 90% LTV.
• Loans ₹30L - ₹75 Lakhs: Up to 80% LTV.
• Loans >₹75 Lakhs: Up to 75% LTV.

The Twist: These are maximum limits. Banks are not obligated to offer them. For second homes—especially in non-metro "tourist" zones—banks aggressively de-risk.

Reason 1: The "Resale Price" Variance

In a city, finding a comparable sale price is easy. In a hill station or beach town, valuation is subjective. One villa sells for ₹5 Cr; the neighbor sells for ₹3 Cr. Banks protect themselves by sanctioning loans on the Distress Value, not the Market Value.

• Result: You might get sanctioned only 60-65% of the asking price, forcing you to fund the rest.

Reason 2: The "Holiday" Classification

Some banks internal policy classifies properties in specific pincodes (e.g., Anjuna, Goa or remote Mussoorie) as "Holiday Homes" rather than standard residential units.

• Interest Rate: Often 0.5% - 1% higher than standard home loan rates.
• LTV Cap: Rigidly capped at 60-70%.

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The "Real" Down Payment Math

Let’s say you are buying a ₹2 Crore Villa in North Goa. You expect an 80% loan (₹1.6 Cr) and plan to pay ₹40 Lakhs down.

The Bank's Reality:

1. Valuation: The bank valuer assesses the property at ₹1.8 Cr (conservative estimate).
2. LTV Applied: 70% (Second home risk adjustment).
3. Sanction Amount: 70% of ₹1.8 Cr = ₹1.26 Cr.

Your Shortfall:

• Cost: ₹2 Cr.
• Loan: ₹1.26 Cr.
• Balance to Pay: ₹74 Lakhs.

Plus Transaction Costs: Stamp Duty + Registration in Goa (~8.5%) + Brokerage (2%) = ~₹21 Lakhs.

Total Cash Needed Upfront: ₹74L + ₹21L = ₹95 Lakhs.

• Expectation: ₹40 Lakhs.
• Reality: ₹95 Lakhs.
• Outcome: Deal Collapses.

Pro Tip: Before signing a token amount (ATS), get a Pre-Sanction Letter from a local branch in the destination city. A Delhi branch manager may not understand Goa land valuations.

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How to Improve Eligibility

1. Target "Approved" Projects: Large developers (Tata, DLF, renowned local builders) often have pre-approved tie-ups with banks (SBI, HDFC). In these projects, 75% LTV is standard and valuation matches the asking price.
2. Joint Application: Adding a co-applicant with strong income helps convince the credit manager of repayment capability, even if the asset is "risky."
3. Liquid Collateral: Some wealth management/private banking arms will fund up to 90-100% of the property value if you pledge mutual funds or FDs as additional security (Overdraft against securities).

Summary

When buying a second home, Cash is King. Do not rely on the "80:20" rule. Plan for a "60:40" split. If the bank gives you more, treat it as a bonus. If you rely on 80% leverage, you risk losing your token money when the valuation comes in short.

Next Step: Now that you know the financing limits, check the Hidden Costs in Goa & Dehradun to calculate your exact "Cash to Close" figure.