High-Ratio Loan

A high-ratio loan is a mortgage that has a down payment of less than 20% of the purchase price of the home. This type of loan is considered to be riskier for the lender, as there is a greater chance that the borrower will default on the loan. As a result, high-ratio loans typically have higher interest rates than conventional mortgages.

There are a few different types of high-ratio loans available, including:

* **Mortgage insurance:** This type of loan requires the borrower to purchase private mortgage insurance (PMI). PMI is a type of insurance that protects the lender in the event that the borrower defaults on the loan. The cost of PMI is typically added to the monthly mortgage payment.
* **Home equity loans:** This type of loan allows the borrower to borrow against the equity in their home. The interest rate on a home equity loan is typically higher than the interest rate on a conventional mortgage.
* **Reverse mortgages:** This type of loan allows older homeowners to borrow against the equity in their home. The interest rate on a reverse mortgage is typically higher than the interest rate on a conventional mortgage, and the borrower must repay the loan when they sell their home or pass away.

Before taking out a high-ratio loan, it is important to carefully consider the risks and rewards. This type of loan can be a good option for borrowers who do not have a large down payment, but it is important to make sure that you can afford the monthly payments.

Here are some additional things to keep in mind when considering a high-ratio loan:

* The down payment: The lower your down payment, the higher your monthly payments will be.
* The interest rate: The interest rate on a high-ratio loan is typically higher than the interest rate on a conventional mortgage.
* The PMI: PMI is a type of insurance that protects the lender in the event that the borrower defaults on the loan. The cost of PMI is typically added to the monthly mortgage payment.
* The term of the loan: The term of the loan is the length of time that you will have to repay the loan. The longer the term, the lower your monthly payments will be, but the more interest you will pay over the life of the loan.
* The prepayment penalty: Some high-ratio loans have a prepayment penalty. This is a fee that you must pay if you pay off the loan early.

If you are considering a high-ratio loan, it is important to talk to a qualified mortgage lender to discuss your options and find the best loan for your needs.