What is a Mortgage Sliding Scale?

For example, if a homebuyer is looking to purchase a house for $1,100,000, a mortgage lender might fund a 1st mortgage at 80% loan-to-value, resulting in a mortgage amount of $880,000 and a down payment requirement of $220,000. However, the same lender, on the purchase of a $2,500,000 property may only provide a 1st mortgage at 80% on the first $2,000,000 of the purchase price and 50% on the $500,000 balance, thus resulting in a mortgage amount of $1,850,000, a total loan-to-value of 74%, and a down payment requirement of $650,000, which works out to an additional $150,000 than if the mortgage lender was to provide a 1st mortgage to 80% loan-to-value on the entire $2,500,000 purchase price in the absence of a sliding scale policy. 

In the example of an existing homeowner looking to refinance an existing mortgage or access the equity in their home, the essence and outcome of a sliding scale policy are similar. Say that the homeowner’s home appraised at $1,100,000, and they are looking to obtain a new 1st mortgage for $880,000. Assuming they qualify, the homeowner should have no difficulty obtaining said mortgage, provided the lender doesn’t have a sliding scale policy triggered based on a $1,100,000 home value. However, if a homeowner is looking to obtain a new 1st mortgage for $2,000,000 on their home appraised at $2,500,000, if a sliding scale is triggered, using the same policy in the purchase example above, the homeowner would be limited to a total borrowing amount of $1,850,000.