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. Standing Loan

    A type of loan where payments are made of interest only. Repayment ...
  3. 125% Loan

    A loan, usually a mortgage, with an initial loan amount equal ...
  4. Origination

    The process of creating a home loan or mortgage. During the origination ...
  5. Future Advance

    A clause in a mortgage which enables the lender to advance funds ...
  6. Refinance

    1. When a business or person revises a payment schedule for repaying ...
Related Articles
  1. Investing

    Financing Basics For First-Time Homebuyers

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

    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. Insights

    An Introduction to Government Loans

    Government loans further policymakers' efforts to create positive social outcomes by offering timely access to capital for qualified candidates.
  4. Personal Finance

    Understanding Term Loans

    A loan from a bank for a specific amount that has a specified repayment schedule and a floating interest rate.
  5. Personal Finance

    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 ...
  6. Managing Wealth

    Unsecured Personal Loans: 8 Sneaky Traps

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

    Home Improvement Loans: What Are Your Best Options?

    If you plan on taking out a home improvement loan, you should know what your options are and which ones might be best for your situation.
  8. Personal Finance

    How to Get a No-Down-Payment Mortgage

    It's harder to find, but you can still buy a home without any money down.
  9. Managing Wealth

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
  10. 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.
RELATED FAQS
  1. What is the difference between a PMI (primary mortgage insurance) loan and a Federal ...

    Understand the difference between a conventional mortgage that requires primary mortgage insurance and a Federal Housing ... Read Answer >>
  2. 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 >>
  3. How do construction loans work?

    Construction loans are obtained either by the prospective home owner or the actual builder. There are two types of construction ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  5. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
Hot Definitions
  1. Efficient Frontier

    A set of optimal portfolios that offers the highest expected return for a defined level of risk or the lowest risk for a ...
  2. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the ...
  4. Border Adjustment Tax

    A tax levied on goods based on where they are sold – exported goods are exempt from tax; those imported and sold in the ...
  5. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  6. Blind Trust

    A trust in which the trustees have full discretion over the assets, and the trust beneficiaries have no knowledge of the ...
Trading Center