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The mortgage indemnity charge sometimes called a high percentage lending fee applies to some high loan to value (LTV) mortgages. This is where the mortage itself is not much less than the value of the house it is secured on, normally above 90% LTV. It is fairly common practice for the lender to take out an insurance policy to extract yet more money from hard up home buyers in case their loan turns bad, they incur losses and if property needs to be re-possessed, which can’t be covered by the value of the house.

For high Loan to Value (LTV) mortgages i.e. 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 the entire loss 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 ratio the M.I.G. fee can be a significant cost. Most lenders have a different name for this charge so make sure you ask about it.

You should also understand that because the charge acts as a form of insurance for the lender not the borrower the lender can claim part or even all of its ‘losses’ should you fall into serious arrears and they need to repossess the property. It is important to understand your responsibilities when taking on a mortgage and if you are in any doubt you should consult your IFA who will be able to help you understand what they are.

There are 4 main different types of interest structures for mortgages:

Fixed
A fixed rate mortgage means that the amount you repay each month to the lender can be at a fixed rate for a period of time. This period is normally 2-5 years but can be longer or shorter. Normally at the end of the special fixed rate period the mortgage reverts to the lenders standard rate which varies dependent on interest rates and market conditions. It is probably a good time to look for a new fixed rate deal at this point if you have no redemption.



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