what is the mortgage idemnity gaurentee

evosy1978

hello

what is this fee and when do we pay it and who to, and does it differ from lender to lender.

thanks

MarkyMarkD

The fee is to cover the lender for the increased risk of lending you more than 90% (normally) of the value of your property. Its value is typically 7-8% of the value you borrow over 75% of the property value. You pay it to the lender.

It insures the lender's risk, not your risk, and there is no financial benefit to you in having the cover; but it is the lender's requirement that you pay this premium.

david29dpo

very true. it is strange that YOU pay for the insurance but it covers someone else, but thats the way it works!

sarkin

If you get repossed the insurance company will them come after you if there is any shortfall between mortgage and selling price. These insurances were put in place after the last crash to protect the lender. Once bitten and all that

Tootsie_Roll

sarkin wrote:

These insurances were put in place after the last crash to protect the lender. Once bitten and all that

Actually they have been around a lot longer than that. Many, many IGP's paid out in the years following the last crash. Most of the insurance companies pay out then get the lender to recover any shortfall from the borrower - it has always mysitified me that you pay for insurance cover only to have the insurance company come after you to cover their loss - why bother in the first place ?

MarkyMarkD

Because it's insurance for the lender's risk, not insurance against the customer not paying their mortgage.

evosy1978

thanks for replies.

so what stage do you pay it. is it also called high lender charge, or is that somthing different.

thanks

evosy1978

thanks for replies.

so what stage do you pay it. is it also called high lender charge, or is that somthing different.

thanks

bockster

i paid it the solicitor as an upfront one off payment ready for completion,
but i think most people add it to the mortgage advance, trouble is, this way you will pay intrest on it for 25? years! bl**dy tsb took it off me both ways until i spotted it!

Tootsie_Roll

MarkyMarkD wrote:

Because it's insurance for the lender's risk, not insurance against the customer not paying their mortgage.

I'm well aware of that having quoted it myself on dozens of occasions to people I have recovered the debts from - it still doesn't seem to make sense though. My wife has insurance on her car (I'm covered as an additional driver) - I drive it and smash it up, wife claims on insurance and receives payout. The insurance company don't then come to me asking me to pay the money they have lost. In this example what would be the point of having the cover in the first place if you were going to be made to pay back any loss.

maninthestreet

MarkyMarkD wrote:

Because it's insurance for the lender's risk, not insurance against the customer not paying their mortgage.

Then the lender should pay the premium - it's their risk, and they benefit from any payout from the insurance policy.