What does an LTV greater than 80% typically require?

An LTV greater than 80% typically requires mortgage insurance to protect lenders. When the loan-to-value ratio exceeds 80%, it indicates that the borrower is financing a significant portion of the property's value. This increased risk for the lender often leads to the requirement of private mortgage insurance (PMI) or similar insurance products.

Mortgage insurance serves as a safeguard for lenders against potential defaults, allowing them to approve loans for borrowers who may not have a substantial down payment. Since the borrower is putting less equity into the home, the insurance mitigates the lender’s risk and facilitates the borrowing process. This requirement is common practices in the mortgage industry and helps maintain lender security while enabling borrowers to access financing opportunities despite lower equity.

In contrast, standard loan terms without additional fees, access to government-backed loans, or a lower interest rate are not typically linked directly to LTV thresholds above 80%. Hence, they do not address the risk concern that leads to requiring mortgage insurance in higher LTV scenarios.