Final answer:
When a co-borrower does not plan to occupy the property as their principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV). This limitation reduces the risk for the lender. Co-borrowers in this situation may have other mortgage options available, but they should carefully consider their options and ability to make payments.
Step-by-step explanation:
When a co-borrower does not plan to occupy the property as their principal residence, the maximum mortgage is limited to 75% loan-to-value (LTV). This means that the co-borrower can only borrow up to 75% of the property's appraised value. For example, if the property is appraised at $200,000, the maximum mortgage amount for the co-borrower would be $150,000 (75% of $200,000).
This limitation on the maximum mortgage for co-borrowers who do not plan to occupy the property as their principal residence is put in place to reduce the risk for the lender. Since the co-borrower is not living in the property, there is a higher chance of default on the loan. By limiting the loan-to-value to 75%, the lender can mitigate some of this risk.
Co-borrowers who do not plan to occupy the property as their principal residence may have other mortgage options available to them, such as investment loans or non-owner occupied loans. These types of loans typically have higher interest rates and stricter requirements compared to loans for owner-occupied properties. It is important for co-borrowers to carefully consider their options and assess their ability to make payments before committing to a mortgage.