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| A
to Z of Mortgages |
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A useful glossary of terms and information to see you through
the mortgage minefield.
Use the links below.
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Mortgage Indemnity Guarantee (MIG)
- This is known under many different names which include the
following; High Percentage Lending Fee, Indemnity Premium, Insurance
Guarantee Premium, Additional Security Fee, Mortgage Guarantee
Premium, Mortgage Indemnity Premium amongst others.
This is a fee that is payable if a 'high percentage loan
to value' is required. The MIG fee is used by the lender to
purchase insurance to cover them in the event that you default
on the mortgage and they make a loss on possession and resale
of the property. The policy has no benefit to the borrower
and offers no protection - indeed if your property is repossessed
and the lender claims on the Mortgage Indemnity Insurance
then the insurance company that has paid out the claim to
the mortgage lender can still pursue you, the borrower, for
repayment of that amount. The actual terms of the MIG will
vary considerably from lender to lender and if you are told
that this will apply you should check the details. Many lenders
will impose this additional fee if you wish to borrow more
than 75% of the value of the property and the premium payable
will be calculated as a percentage of the amount you wish
to borrow over that figure.
There are a handful of lenders that do not charge MIG premiums
or who charge in a different way. A number of lenders have
announced that as an incentive to attract new business they
will meet the cost of the Indemnity premium. The terms/conditions
as detailed above remain the same - all that has changed is
the lender is paying the premium. Generally the changes that
have been announced to date involve mortgage applications
where there is a 10% deposit (90% loan to value ratio).
A further point to note is that some lenders who start charging
at a set figure, say 80% will back-charge the premium to 75%
when calculating the indemnity charge. So if you are borrowing,
say, 82% the premium is not charged from 80% but from the
75% level.When discussing your application with your chosen
lenders be sure to ask whether MIG applies and at what level
it is calculated.
Mortgage Term - This is the number
of years over which the mortgage is arranged. If a capital
and interest mortgage is being considered then it is worth
looking at shorter terms than the traditional 25 year mortgage
as considerable interest savings can be made by reducing the
mortgage term by even a couple of years.
Mortgage Valuation - This is the
most basic form of survey and is the minimum required by lenders
in order to ascertain the suitability of the property as security
for their loan. Although the borrower will normally receive
a copy of this report it should not be relied upon as a comprehensive
report on the condition of the property. A more detailed report
(either a Home Buyers Report or Structural Survey) should
be commissioned when considering the purchase of a property.
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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.
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