What is typically a concern if a borrower has a high Loan-to-Value Ratio?

What is typically a concern if a borrower has a high Loan-to-Value Ratio?

• A. They may struggle to repay the loan
• B. They have too little rental income
• C. They benefit from equity in their home
• D. They are overly reliant on disability income

Answer: (A)

A high Loan-to-Value (LTV) Ratio indicates that a borrower is utilizing a significant amount of borrowed funds relative to the value of the property being financed. This often means that the borrower has made a small down payment and is taking on a larger debt obligation. In such situations, lenders may be concerned about the borrower's ability to repay the loan because a high LTV ratio often correlates with higher financial risk. If the borrower faces any financial difficulties, they may find it challenging to meet their mortgage payments, increasing the likelihood of default. Therefore, the correct concern regarding a high LTV ratio is related to the borrower's struggle with loan repayment.

A high Loan-to-Value (LTV) Ratio indicates that a borrower is utilizing a significant amount of borrowed funds relative to the value of the property being financed. This often means that the borrower has made a small down payment and is taking on a larger debt obligation. In such situations, lenders may be concerned about the borrower's ability to repay the loan because a high LTV ratio often correlates with higher financial risk. If the borrower faces any financial difficulties, they may find it challenging to meet their mortgage payments, increasing the likelihood of default. Therefore, the correct concern regarding a high LTV ratio is related to the borrower's struggle with loan repayment.