Additional Security Fees explained and available help from Shire Direct
Additional Security Fees are sometimes required by mortgage lenders to protect them against financial loss in the event that the borrower defaults on their mortgage.
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Here we explain in greater depth what Additional Security Fees are, how they work, together with how much they might cost, and how we might be able to assist you with a mortgage or remortgage.
Table of Contents:
What is an Additional Security Fee?
So what are Additional Security Fees? An Additional Security Fee is sometimes required in instances where the mortgage borrowings exceed a certain percentage of the property value, usually 75%.
The fee is usually in the form of a one-off upfront fee that is used to pay for a single-premium Indemnity Insurance policy to protect the mortgage lender against financial loss in the event that the borrower defaults on their mortgage.
Additional Security Fees are also sometimes referred to as:
- Indemnity Guarantee Premium
- Mortgage Indemnity Premium
- Mortgage Indemnity Guarantee Premium
- MIG
- Higher Lending Fee
- Higher Lending Charge
What protection will an Additional Security Fee offer to me as a borrower?
Put very simply, the answer is none unfortunately! Borrowers must understand that although it is they who will pay the Additional Security Fee or Indemnity Insurance premium, they will not be protected. Infact, in the event of a repossession, and the insurance company has to pay a lender's claim, the insurance company are entitled to pursue the borrower for the amount the insurance company has had to pay the lender!
The only benefit the borrower is likely to receive is the ability to borrow more than they would otherwise have done if they hadn't paid the Additional Security Fee.
How much do Additional Security Fees cost?
Additional Security Fees can be very expensive!
The cost will depend on the property value, the amount of deposit being paid, and the lender used. In the following example, the property value is £120,000, at 95% borrowing, this will be subject to Additional Security Fees based on:
| 95% Mortgage | £114,000 | (£120,000 x 95%) |
| 75% Additional Security Fee Threshold: |
- £90,000 | (£120,000 x 75%) |
| Thus Additional Security Fee paid on: |
£24,000 |
Therefore if the lender's Additional Security Fee rate were 8% then the cost would be [£24,000 x 8%=] £1920.00. The fee can generally be added to the mortgage loan, or paid upfront. If the cost is added to the mortgage, then it will incur interest over the mortgage term.
Can I avoid paying Additional Security Fees?
It is possible to avoid paying Additional Security Fees in certain circumstances.
Not all lenders charge Additional Security Fees. So regardless of the amount of deposit, and the loan to value at which you are borrowing, with some lenders you will not have to pay these fees. However, it is not always prudent to base your choice of lender on payment of additional security fees. It is sensible to consider all the costs, fees, interest rates, incentives and other features before deciding which product may be the best for you.
Can Shire Direct help me?
Naturally, our professionally qualified Mortgage Advisors will be only too pleased to examine your requirements, needs, circumstances and aspirations, and will then discuss the various options available to you. Please don't hesitate to Contact Us. You can call us on 08000 282 281, the call is FREE and lines are open until 10.00pm everyday including weekends. Alternatively, you can enquire online anytime! We will of course help in any way we can.
Hopefully, we have answered any questions you may have had about Additional Security Fees and how the Additional Security Fee works. Don't forget we're just a free telephone call or couple of mouse clicks away and will be delighted to help in any way possible.
The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.
There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.
THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Adding existing debt to your mortgage will increase the repayment term and overall cost.
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