High Ratio Loan

DEFINITION of 'High Ratio Loan'

A loan of any type for which a relatively small down payment must be made. For mortgages, a high value loan usually covers more than 80% of the property's value. Most high ratio home loans require some form of insurance coverage in order to protect the lender.

BREAKING DOWN 'High Ratio Loan'

High ratio home loans allow lower income and asset buyers to purchase homes with relatively little cash on hand. The wisdom of this business practice has been called into question during the mortgage crisis of 2008. High ratio loans generally charge higher rates than lower ratio loans.

RELATED TERMS
  1. Combination Loan

    1. A transaction consisting of two separate loans for the same ...
  2. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  3. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  4. 125% Loan

    A loan, usually a mortgage, with an initial loan amount equal ...
  5. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
  6. Direct Consolidation Loan

    A loan that combines two or more federal education loans into ...
Related Articles
  1. Personal Finance

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  2. Managing Wealth

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  3. ETFs & Mutual Funds

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  4. Markets

    All About Government Loans

    There are many reasons to seek a government loan rather than one from a private lender. Government loans typically have low interest rates and offer fixed or subsidized options, as well as deferred ...
  5. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

    If you are seeking a personal loan, be aware of these pitfalls before you proceed.
  6. Personal Finance

    Understanding Loans

    A loan is the act of giving money, property or other material goods to another party with the expectation of being repaid.
  7. Personal Finance

    How To Apply For a Personal Loan

    Learn about different avenues for applying for a personal loan, and learn valuable tips to help you get your personal loan application approved.
  8. Personal Finance

    Personal Loans vs. Car Loans

    How to tell whether a personal loan or a car loan is better for you.
  9. Personal Finance

    The Smartest Way to Tap Your Home Equity

    Using your home as a source of funds can be a smart choice in some situations. Just be sure to carefully run the numbers.
  10. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
RELATED FAQS
  1. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  2. Which loan should I pay off first?

    I have a $33,000 mortgage at 4.5% interest due in June 2019. I also have $627 in monthly car loan payments for loans that ... Read Answer >>
  3. What are the pros and cons of life insurance policy loans?

    Find out the pros and cons of borrowing against your life insurance policy to help you decide if this loan type is the right ... Read Answer >>
  4. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  5. What are the typical requirements to qualify for closed end credit?

    Learn what closed-end credit is, and the various requirements that borrowers must meet in order to obtain a closed-end credit ... Read Answer >>
  6. What are the differences between a home equity line of credit (HELOC) and a home ...

    Learn the differences between a home equity loan and a home equity line of credit, and find out how to select the one that ... Read Answer >>
Trading Center