What type of mortgage insurance is required when the loan-to-value ratio exceeds 80%?

When the loan-to-value (LTV) ratio exceeds 80%, lenders typically require Private Mortgage Insurance (PMI) to protect themselves against potential losses in case the borrower defaults on the loan. PMI is a policy that the borrower pays for, which allows the lender to reduce their risk when they lend money for a higher percentage of the property's value.

This type of insurance is particularly relevant for conventional loans where no government backing exists. It serves as a safeguard for lenders, ensuring that if the borrower defaults, the lender can recover some losses through the PMI. Borrowers might see PMI added to their monthly mortgage payments, or they may be able to pay it upfront, depending on the loan terms.

Government Mortgage Insurance, such as that from the FHA, serves a different purpose and applies to specific types of loans; it does not broadly cover all loans with high LTV ratios. Similarly, Loan Protection Insurance typically pertains to borrowing programs that are not directly tied to LTV requirements or the specifics of mortgage insurance. Understanding the distinction of PMI's role in maintaining the lender’s security is essential in the context of high LTV mortgages.