Mortgage indemnity insurance and premiums information
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Mortgage indemnity insurance
This type of mortgage fee goes under a number of different names, such as Mortgage Indemnity Guarantee and is also commonly called Higher Lending Charges. This type of fee is designed to protect the mortgage lender in the event of a borrower missing a mortgage payment or falling into arrears.
Generally, a mortgage lender will use the money provided by this fee to buy insurance to cover property repossession and sale, making certain that they cannot come out at a loss.
As a borrower, it is worth being aware that this type of fee is not designed to protect the borrower. The borrower is being asked to pay a premium to protect the lender.
Many lenders have scrapped higher lending charges, but on some loans these charges still apply.
Costs of this type are usually levied on loans with little in the way of deposit, particularly 100 per cent mortgages, and 125 per cent mortgages. For lower loan to values, the cost of the charge may be significantly lower.
Normally, this type of charge only applies when borrowers are looking for 75 per cent plus mortgage value to be lent. A significant deposit will likely waive the need for these charges. Many lenders make it their policy to pay these charges themselves, but be aware that these lenders may apply other fees to make up the difference.
Some lenders give the options of adding the higher lending charge to the mortgage loan itself, but again, the borrower will be charged interest.
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