Minimum LTV?

[iced]

Have a quick and hopefully easy question for the mortgage loan officers out there.

Is there a minimum LTV that one can ask for before it ceases to be a mortgage and just becomes a regular loan? I'm hoping that since it would be secured against real estate the banks won't care, but I am reading that some banks impose a minimum amount they'll loan for a mortgage so now I'm wondering if some impose a minimum LTV as well.

[DallasLoanGuy]

not aware of a minimum ltv for a mortgage

[StartingOver10]

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@iced wrote:

Have a quick and hopefully easy question for the mortgage loan officers out there.

Is there a minimum LTV that one can ask for before it ceases to be a mortgage and just becomes a regular loan? I'm hoping that since it would be secured against real estate the banks won't care, but I am reading that some banks impose a minimum amount they'll loan for a mortgage so now I'm wondering if some impose a minimum LTV as well.

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^A mortgage is a "regular" loan.  The difference is that it is a secured loan - secured by property. It is secured because the mortgage is actually a lien against a property in the amount of the original amount borrowed. The lien is recorded in public records. If you are putting up property as your collateral for a loan, then that loan is referred to as a mortgage.

When you say "regular loan" do you mean an unsecured loan? 

I have never seen a minimum LTV imposed - just a maximum LTV depending upon the loan program. I have seen a minimum loan dollar amount - mainly because some lenders don't want to go through the process for small dollar loans. 

[iced]

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@StartingOver10 wrote:

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@iced wrote:

Have a quick and hopefully easy question for the mortgage loan officers out there.

Is there a minimum LTV that one can ask for before it ceases to be a mortgage and just becomes a regular loan? I'm hoping that since it would be secured against real estate the banks won't care, but I am reading that some banks impose a minimum amount they'll loan for a mortgage so now I'm wondering if some impose a minimum LTV as well.

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^A mortgage is a "regular" loan.  The difference is that it is a secured loan - secured by property. It is secured because the mortgage is actually a lien against a property in the amount of the original amount borrowed. The lien is recorded in public records. If you are putting up property as your collateral for a loan, then that loan is referred to as a mortgage.

When you say "regular loan" do you mean an unsecured loan? 

I have never seen a minimum LTV imposed - just a maximum LTV depending upon the loan program. I have seen a minimum loan dollar amount - mainly because some lenders don't want to go through the process for small dollar loans. 

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I guess in my case it wouldn't matter what it was called as long as I get the better "mortgage" rates. My concern is the following scenario:

1. I go to a bank and get pre-approved for say a $750,000 mortgage at 3.5% interest.

2. I go home shopping and find the right home for $500,000. 

3. I put up $450,000 down on the house and go back to the bank and say that I only need $50,000 of that $750,000 mortgage they offered.

4. The bank responds by saying that's too low of an amount for them to process the mortgage with, but they'll gladly offer me a personal loan...at 7% interest.

I read some banks put 50k as the minimum amount they'll loan, but I'm wondering on properties where the LTV, such as in this example, works out to something well under 10% also spooks banks. Do they also look at that and say there's just not enough meat on the bone for them to bother with?

[StartingOver10]

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I read some banks put 50k as the minimum amount they'll loan, but I'm wondering on properties where the LTV, such as in this example, works out to something well under 10% also spooks banks. Do they also look at that and say there's just not enough meat on the bone for them to bother with?

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^^^Yes, that's why they set min dollar amounts. But if you follow your scenario, most bankers would love it because they have a very small first on property that is much higher in value = means there is virtually no risk to the lender.  If you do default, they don't have to worry about getting repaid at all. All they have to do is f/c and sell the asset - with that low of an LTV you are virtually guaranteed to not default (IMO) and if you do default, the lender is covered.

[Dalmus]

 Or, if one had the money, only put $400,000 down, take the $100K mortgage at 3.5%, then pay $50K imediately, and pay the rest as agreed. You'd pay the mortgage off in much less time, more or less negating the extra interest that was calculated on $100K vs $50K. 

 Assuming there's no prepayment penalty, of course.