For a mortgage to be classified as 'high ratio,' what is the loan-to-value (LTV) ratio?

For a mortgage to be classified as 'high ratio,' what is the loan-to-value (LTV) ratio?

• A. Less than 60%
• B. Less than 80%
• C. Equal to or greater than 80%
• D. Equal to 100%

Answer: (C)

A mortgage is classified as 'high ratio' when the loan-to-value (LTV) ratio is equal to or greater than 80%. This means that the borrower is financing more than 80% of the property’s value through the mortgage, which typically requires mortgage insurance to protect the lender in case of default. LTV is a critical measure used by lenders to assess the risk associated with a mortgage. When the ratio is high, it indicates that the borrower has a smaller equity stake in the property, which can lead to a higher risk of default if property values decline. By requiring mortgage insurance for high-ratio loans, lenders mitigate some of this risk. Thus, classifying such a loan as 'high ratio' underscores the importance of equity in real estate transactions and the protective measures in lending practices.

A mortgage is classified as 'high ratio' when the loan-to-value (LTV) ratio is equal to or greater than 80%. This means that the borrower is financing more than 80% of the property’s value through the mortgage, which typically requires mortgage insurance to protect the lender in case of default.

LTV is a critical measure used by lenders to assess the risk associated with a mortgage. When the ratio is high, it indicates that the borrower has a smaller equity stake in the property, which can lead to a higher risk of default if property values decline. By requiring mortgage insurance for high-ratio loans, lenders mitigate some of this risk.

Thus, classifying such a loan as 'high ratio' underscores the importance of equity in real estate transactions and the protective measures in lending practices.