Higher Lending Charges explained and available help from Shire Direct...
Higher Lending Charges or HLC's for short - what are they, how do they work, how much do they cost, and can the Higher Lending Charge be avoided?
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Read on for our answers to these questions regarding Higher Lending Charges and how we might be able to assist you in making the right choice to meet your needs, requirements and circumstances.
Table of Contents:
What are Higher Lending Charges?
Higher Lending Charges (or HLC's for short), were formerly known as Mortgage Indemnity Guarantee (MIG) premiums. Some lenders apply Higher Lending Charges where the amount of mortgage advance is greater than a pre-determined loan to valuation (LTV) percentage (usually 75%). Traditionally, lenders are happy to advance mortgage funds of up to 95% of the property value, subject to the payment of a Higher Lending Charge.
The Higher Lending Charge is normally used to purchase a mortgage indemnity policy, which can be claimed on by the lender in the event the property is repossessed, and where a shortfall results in the amount recovered on the sale of the property.
Although the borrower will have to pay this charge, it is for the lender's benefit only. It does not provide the borrower with any protection at all. Infact if the lender does claim, the Insurer is likely to pursue the borrower for the recovery of the amount paid to the lender. The only benefit the borrower will receive is the ability to borrow a higher percentage than the lender would allow without the policy!
How much do Higher Lending Charges cost?
Higher Lending Charges can amount to thousands of pounds!
The amount will vary on the property value, the amount of deposit being paid, and the lender used. In the following example, an amount of £20,000 will be subject to Higher Lending Charges:
Property Value: £100,000
95% Mortgage: £95,000
75% HLC Threshold: £75,000-
Thus HLC paid on: £20,000
Therefore if the lender's Higher Lending Charge rate were 6% then the cost would be £1200.00 [£20,000 x 6%=], whereas if the Higher Lending Charge rate were 11%, the cost would be [£20,000 x 11%=] £2200.00, thats £1000 more! 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 Higher Lending Charges?
In certain circumstances, yes, you can.
Not all Mortgage Lenders apply Higher Lending Charges at all. So regardless of the amount of deposit, and the loan to value at which you are borrowing, you will not have to pay Higher Lending Charges. However, it is not necessarily prudent merely to base your choice of lender on this factor alone. 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.
Know your options!
Well hopefully we've managed to explain and answer any initial questions you had about Higher Lending Charges. It is important that you know the options available to you, so why not give one of our professionally qualified Mortgage Advisors a call. We will be only too pleased to examine your needs, requirements, circumstances and aspirations, and will happily discuss the various options available to you.
Please don't hesitate to contact us if you're looking for a mortgage and want to know more about Higher Lending Charges, our Freephone Telephone number is 08000 282 281, our lines are open from 8am until 10pm including weekends. Or why not enquire online right now, we'd love to hear from you and of course will try to help you in any way we can.
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.
Are you worried and becoming stressed because you are having problems getting a mortgage or remortgage? Worry and stress no more! Here at Shire Direct we provide tailor made mortgage solutions to suit you, and can usually help with all kinds of circumstances including...
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