"The Easy Way to Get Your Best UK Mortgage" |
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Mortgage
Guide
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Mortgage
Basics
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Higher-lending fees explained
If
you borrow a high proportion of your property's
value typically 90 per cent or above
the lender may charge a higher-lending
fee.
It will use part of this to pay for an insurance
policy to cover it if you can't keep up
your repayments. The rest is profit!
This can also be called an indemnity
guarantee, additional security fee
or mortgage advance premium.
Here's how it works
If you get into financial difficulties and
fall badly behind with your mortgage payments,
your lender can repossess your property.
It will then sell it to get back the money
it leant you. If it doesn't make enough
to cover what you owe, the insurance will
make up the difference.
How much will the fee be?
This depends on the value of your property
and how much you want to borrow, but for
someone borrowing £100,000, about £1,500
is typical.
For more on this, read How
higher-lending fees are worked out.
More bad news
You might think it's a good thing that your
lender is insured in case you get into difficulties.
It is. For the lender but not for
you.
You may pay for the policy, but you won't
benefit.
Even if the lender makes use of the policy,
you will still be liable for
the difference between the amount you owe
and the amount the lender sold your property
for.
The good news
There are easy ways to avoid paying this
fee. For more on this, read How
to avoid paying a higher-lending fee.
To find out more about early redemption
penalties, read Early
redemption penalties explained and How
to avoid paying an early redemption penalty.
To read more on this subject please see the list below or your mortgage guide or your home buying guide
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Read On
The Costs of a Mortgage in the UK
Open / General Costs of Getting a Mortgage
Hidden / True Costs of Home Buying and Mortgages
Mortgage Costs That Can arise during the mortgage term
Mortgage Costs - Final Payments / Exit Fees
Why The Mortgage Lenders are So Greedy
Read On / Mortgage Guide
How
to Choose your Mortgage
Types of Mortgage
Remortgages
Where to Find Your Mortgage
Getting a Mortgage in Principle
Read On
Guide to Buying a Home in the UK
Guide to UK Home and Mortgage Insurance
