What is the correct statement regarding security for residential lending?

The statement that additional security can be taken to avoid lenders mortgage insurance is accurate. In residential lending, when a borrower is seeking a mortgage, they are often required to pay lenders mortgage insurance (LMI) if they have a deposit that is less than 20% of the property's value. To mitigate this cost, lenders may allow borrowers to provide additional security, such as using equity from another property. This additional security reduces the risk for the lender and can enable the borrower to avoid LMI altogether.

This practice is beneficial for both parties: it provides the borrower with a way to reduce upfront costs and protects the lender's investment by having additional collateral. Lenders assess the overall risk involved and the value of the additional security provided before making a decision.

Contextually, the other options do not accurately reflect common practices in residential lending. For instance, the notion that additional security cannot be taken contradicts typical lending practices where multiple forms of collateral may be considered. Likewise, the idea that only one type of property can be used restricts the flexibility often present in securing loans. Lastly, the standalone idea that residential loans do not require security is fundamentally inaccurate, as residential mortgages are almost always secured against the property being purchased.