What does a high loan-to-value (LTV) ratio indicate about a loan?

A high loan-to-value (LTV) ratio indicates that the borrower has a larger amount of debt compared to the value of the property being purchased. This situation means that the borrower has less equity in the property, which poses a higher risk for the lender. If the borrower were to default, there is a greater likelihood that the proceeds from a foreclosure sale would not cover the outstanding loan amount, leading to a potential loss for the lender.

Additionally, a high LTV ratio often correlates with higher interest rates, as lenders may charge more to compensate for the increased risk. Therefore, a high LTV suggests a loan that is more risky for lenders because they are more exposed to loss. This is in contrast to the options that suggest lower risk or significant borrower equity, which do not align with the implications of a high LTV ratio.