What loan-to-value ratio typically triggers the need for mortgage insurance?

The typical loan-to-value (LTV) ratio that triggers the requirement for mortgage insurance is commonly around 80%. If a borrower finances more than 80% of the property's value, the lender perceives a higher risk of default, resulting in the necessity for mortgage insurance to protect against potential losses.

In this context, a loan-to-value ratio of 81% indicates that the borrower has financed 81% of the home's value, which is above the 80% threshold. This higher LTV ratio signals to lenders that the borrower has less equity in the property, increasing the risk of a loss in the event of default.

Understanding LTV ratios and the implications of mortgage insurance is important for both borrowers and lenders. Borrowers may seek ways to avoid or reduce the cost of mortgage insurance, which can include making a larger down payment to keep the LTV below the cutoff point.