Need help understanding Mortgage Offer

bemma21

Hi

We got our mortgage offer today, and there is one condition I am having trouble understanding. I'm a FTB.

Any help/advice would be greatly appreciated as I cannot speak to my Mortgage advisor til late next week as she is on A/L.

'Additional security of £X to be provided to the Company by insurance companies. Higher lending charge of £X to be deducted from the advance.'

What exactly does that mean? This is for a 90% mortgage.

Thanx

kingstreet

Lenders really only want to lend upto 75% of the value of the property. To lend the extra you need, they want you to pay for insurance cover for the excess amount - the bit from 75% upto 90%.

In the event of you defaulting on the mortgage payments, the lender can then repossess the property, selling it cheaper and covering the "loss" by claiming on the insurance.

The insurer then has the right to reclaim from you any money paid to the lender under the principle of subrogation.

So this cover is expensive, it's at your expense and you can derive no benefit from it whatsoever.

If you are only just finding out about this now, you should check section 8 of you key facts illustration where this should have been set out prior to your selection of this lender/product. Consider making a complaint if it does not appear there and you were not made aware of it earlier.

Have you added the X in lieu of the amount which is actually shown there, or are there X printed instead of amounts? This may indicate it does not apply to your mortgage.

bemma21

Thanks KingStreet.

Yes, the X was added in lieu of the amount, which is really another 10% of the total of the mortgage.

The mortgage advisor never said anything about this nor is it mentioned anywhere in the key facts illustration. I read read and reread it and no where does it mention it.

This has made me quite a bit annoyed with my mortgage advisor, as she never mentioned this at any point. She said that is was classed as a 'loyalty' mortgage and all we would need would be the 10% deposit.

Thank you again.

kingstreet

Can you provide the lender's name and the details of the purchase price, mortgage amount, product (rate/term) and the lender's product code if there is one?

bemma21

Its with The Woolwich

Purchase price is £75k, loan amount £67,500 + £499 product fee. Its a 4 year fixed loyalty mortgage @ 6.19%. Term of loan is 32 years.

Its on their website, but cannot find product code - copied below

The Additonal amount they want is £7999.

Thanx
4 Year Fixed Barclays loyalty mortgages†
6.19% until 30 Sept '16 3.89% (BBBR + 3.39%) variable for the remaining term4.8% APR £499 90% (max) of the value of your home (Minimum £25,000, maximum £500,000)3% of the balance repaid until 30 Sept '16

bigadaj

Does this mean that migs are back?

I thought they were banned/dropped several years ago.

kingstreet

I believe this is a technical addition to your offer only. It may have been on a previous offer and not removed prior to printing.

I have run the case through Mortgage Brain. I get four potential products, two for current account holders with a £499 fee and two for new borrowers with £999 fees.

The valuation fee in each case is £245, the telegraphic transfer fee £35 and the sealing fee £275. There is no indemnity insurance charge on any of these products, coded 4X6, 4X9, 4Y4 and 4Y1.

All four products are 6.19% fixed to 30/09/16 reverting to BBBR + 3.39% thereafter.

I hope you don't mind me saying this, but there are much better rates out there and you may save money by shopping around a bit further.

kingstreet

bigadaj wrote: »

Does this mean that migs are back?

I thought they were banned/dropped several years ago.

Lenders stopped charging for them under commercial pressure which no longer exists in the market. I'm surprised they haven't re-surfaced sooner TBH. I guess it depends if any insurer wants to carry the risk in a falling market in most parts of the country.

bigadaj

kingstreet wrote: »

Lenders stopped charging for them under commercial pressure which no longer exists in the market. I'm surprised they haven't re-surfaced sooner TBH. I guess it depends if any insurer wants to carry the risk in a falling market in most parts of the country.

Fair point, just hadnt seen any reference to them for. Number of years, apart from occasions where old policies were trying to be enforced against people that and defaulted.

The insurers can price for reasonable range of risk even if prices are falling, the problem I can see is that inflated premiums could then be hidden in the product somewhere and the average person wouldn't question them, just gals to get a mortgage.

bemma21

Kingstrett

Thanks again for this. I am a current account holder with Barclays and thats why I was offered the loyalty mortgage.

It is on the additional conditions page, attached to the mortgage offer, so I am now just hoping that this is just a mistake made on their part.

I know that the mortgage advisor never mentioned any sort of Indemnity when we applied, nor was anything written down about it.

Thanx again!

Dave_Ham

I would be interested to know the outcome of this, although rest assured that I am fairly confident that this is a mistake.

We have done a few Woolwich ones at 90% with this not on the offer - although Kingstreet is correct they are not market leading by any stretch at 90% but sometimes it is a necessary evil.

Good luck