Mortgage Indemnity Guarantee Premiums explained and available help
Mortgage Indemnity Guarantee Premiums may be required by a lender in instances where the borrower needs a mortgage advance that exceeds 75% of the property valuation.
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Here we offer a detailed explanation of Mortgage Indemnity Guarantee Premiums, why they are sometimes necessary, how much they cost, and how we may be able to further assist you.
Table of Contents:
What is a Mortgage Indemnity Guarantee Premium?
Mortgage Indemnity Guarantee Premiums (also known as MIG, Mortgage Indemnity Premiums, Indemnity Guarantee Premiums, Higher Lending Charges, and Additional Security Fees), may sometimes be required by a Mortgage Lender on occasions where the borrower requires a mortgage advance that exceeds 75% of the property valuation.
The Mortgage Indemnity Guarantee premium is used to purchase a single premium insurance policy that is designed to protect the lender against financial loss in the event the property has to be repossessed.
Does a Mortgage Indemnity Guarantee Premium protect me?
Unfortunately, the answer is no, a Mortgage Indemnity Guarantee Premium does not protect you.
Although it is the borrower who will pay the Mortgage Indemnity Guarantee Premium, it is the lender alone that will be protected. The borrower is not covered at all. The only benefit the borrower is likely to receive is the ability to borrow more than 75% loan to value.
It is important that the borrower is aware that, in the event of repossession of his home because he has defaulted in making his mortgage repayments, and there is a shortfall in the amount recovered from the sale, the lender will make a claim on the insurance company. In turn, the insurance company is entitled to pursue the borrower for the amount paid to the lender.
How much do Mortgage Indemnity Guarantee premiums cost?
The cost of the single premium Mortgage Indemnity Guarantee (MIG) premium can be very expensive! The amount of the premium is likely to vary and will usually take into account the property value, the amount of borrowings, and the the lender providing the funds.
For example, if a borrower wished to purchase a property valued at £100,000, with a 95% mortgage, then he is likely to be subjected to a MIG charge based on the level of borrowings, and the usual 75% MIG threshold (£100,000 x 95% = £95,000 less £75,000) that is £20,000. If we assume a MIG charge of 10%, the premium would be (£20,000 x 10%) £2,000.
Although most lenders operating Mortgage Indemnity Guarantee premiums will permit the fee to be added to the mortgage, wherever possible it should be paid upfront. By doing so the cost will not be spread over the mortgage term, thereby saving considerable interest payments.
Do all Lenders charge Mortgage Indemnity Guarantee premiums?
No, infact over recent years, many lenders no longer charge Mortgage Indemnity Premiums, and absorb the losses incurred in the event of property repossession. However, care must be exercised when choosing a mortgage, as it does not always follow that a lender not charging MIG, will provide better products. It is sensible to consider all the costs, fees, interest rates, incentives and other features before deciding which mortgage may be the best for you.
Can Shire Direct offer further help and assistance?
Yes, indeed we can, so if you would like further help and assistance regarding a Mortgage, then why not get in touch. You can enquire online at any time, or you may prefer to call us on FREEPHONE 08000 282 281 - our lines are open everyday including weekends from 8am until 10pm. We will of course endeavour to help in any way we are able to. We'd love to hear from you!
That wraps up our look at Mortgage Indemnity Guarantee Premiums, hopefully we were able to answer your questions. Naturally, our professionally qualified Advisors will be only too pleased to examine your requirements, needs, circumstances and aspirations, and will then discuss the various options available to you should you require further assistance.
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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Shire Direct and Shire Direct Mortgages are trading styles of Shire Processing Centre Limited which is
Authorised and regulated by the Financial Services Authority in respect of regulated mortgage products and general insurances.
Registered No: 302389. Commercial funding and Secured Loans are not regulated by the FSA.
Licensed Credit Brokers. Consumer Credit Licence Number: 349999.
Shire Processing Centre Limited is registered under the provisions of the Data Protection Act by the Information Commissioners Office: Registration No: Z6795249. Registered in England & Wales. Company number: 2732202. Telephone calls may be recorded for training, monitoring and security purposes. All applicants must be aged 18-years or over.