High Percentage Lending Fee

For high Loan to Value (LTV) mortgages ie. where the loan is not much less than the value of the property, it is common practice for the lender to take out a form of 'insurance' to protect against some or all of the losses incurred if the property needs to be taken into possession because of serious arrears.

It is common practice for lenders to pass this charge on to the borrower.

Depending on the amount of loan and the LTV the Mortgage Indemnity Guarantee charge can be a significant cost eg. a £47,500 mortgage on a purchase price/valuation of £50,000 would result in a £750 charge on a typical MIG charge of 7.5% on a normal lending limit of 75% loan to value.

Most lenders have a different name for this charge ie. it may not appear on the mortgage Offer as Mortgage Indemnity Charge or High Percentage Lending Fee.

There are some important facts to understand about the mortgage indemnity charge.

It acts as a form of insurance for the lender not the borrower.

This means that the lender can claim part or all of its 'losses' incurred repossessing the property from the insurance company providing the MIG cover.

Note:

That even after repossession the former borrower will remain liable for any sums owing (shortfall between selling price and mortgage outstanding plus arrears, lenders legal costs and any other charges applied to the mortgage) and can be pursued by the insurance company for payment at a subsequent date.

For more information about Mortgage Indemnity Charges, contact one of our independent advisers.