Higher Lending Fees
Mar 4th, 2008 | By admin | Category: financeHigher lending fees (sometimes known as mortgage indemnity insurance).
This is actually an insurance policy that protects your lender should you not be able to keep up the repayments on your mortgage. This is generally applied when you borrow 90% or more of the purchase price. Which is more than likely the case especially if you are buying a home for the first time.
This is how it works, if you miss several repayments the mortgage lender can evict you from your property and sell it to recoup its money. Often the property will be auctioned and in some cases it can go for less than you purchased it. Your lender will then use the higher lending fee to make up the difference if it hasn’t recouped its losses from the sale of the property.
Unbelievably even though you have lost your home, if the sale of the house and the higher lending fee doesn’t cover the total money owed the mortgage lender can still come after you for the rest. Talk about kicking someone when they are down.
A higher lending fee can be different from lender to lender but typically you are looking at a few thousand pounds.
Mortgage Advice Tips
Not every lender charges a higher lending fee you can avoid it by looking around and by doing this saving yourself a few thousand pounds. If I recall correctly I think Nationwide doesn’t charge a higher lending fee.
Beware though sometimes lenders who do not charge a higher lending fee will attempt to lock you into a long term agreement.
Ideally because of the competitive nature of the mortgage market you should try and switch lenders every couple of years to make sure you are in a position to take advantage of the best deals out there.
Also lenders will offer a headline rate which is a very low initial interest rate which goes up after a period of time. These lenders sometimes charge higher lending fees too, you have been warned.
Anyone else got any mortgage advice tips?
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