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A high-ratio mortgage is one with a high LTV, or loan-value ratio. Today, the high-ratio mortgage is defined as any mortgage for over 80% of the (appraised) value of the property. Historically, some lenders defined the high-ration mortgage limit more conservatively, at only 75%. Typically, the lender will require that any residential high-ratio mortgage be insured. An insured mortgage protects the lender from borrower default, and with a high-ratio mortgage this risk increases as the LTV increases. The high-ratio mortgage is not unusual, especially for first time buyers. As an alternative to the high-ratio mortgage, many buyers opt to obtain a first mortgage that is not a high-ratio mortgage, and augment that with a small junior mortgage. Not only mortgage insurance premiums but also higher interest rates tend to make the high-ratio mortgage slightly more expensive. |
