Higher Lending Charge
The higher lending charge, formerly known as a mortgage indemnity guarantee (MIG), is a fee charged by a mortgage lender where the amount borrowed exceeds a given percentage of the value of the property. This fee may be used by the lender to purchase an insurance policy designed to protect it (the mortgagee) against loss in the event of you defaulting and ceasing to repay your mortgage. The fee may be insisted on by the lender at the start of the loan.
If for example, the property you're buying is valued at (say) £200,000, the lender may demand a higher lending charge (HLC) if you're borrowing more than (say) 75% of its value. So a home loan of £160,000 representing 80% of the property's value will leave you with an HLC to pay. If you choose to borrow £180,000 (90%) of the loan, there's deemed to be a greater risk to the lender of financial loss, so the fee payable by you will be higher. Similarly, if you're looking for a 100% mortgage (and are lucky enough to find one available on reasonable terms), the chances are you'll then have to pay a hefty HLC! These fees tend to be based on the percentage you wish to borrow above a certain threshold set by the lender.
HLC fees are typically charged at up to 8% of the amount of the loan being advanced over the threshold. So, for example a 100% loan of £200,000 with an HLC threshold of 75% might have an HLC premium of £4,000 (£50,000 x 8%). Such premiums may be paid as a 'one off' or added to the mortgage advance. Some lenders make a point of not charging HLCs.
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