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The Mortgage Route A to Z
high loan to value fee

This glossary or A to Z should help clear up any confusion as to what terms mean what in the mortgage and insurance industry

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Letter H

high loan to value fee

Also known as Indemnity premium, higher lending charge, mortgage guarantee premium and high percentage advance fee just to name a few.

When you borrow more than 70% and 75% of the value of a property (differs from lender to lender) the lender feels that they are taking a risk, should they ever repossess that property they could lose money on the mortgage secured on it.

For example 100,000 house with a 85,000 mortgage this is 85% if the house is ever repossessed the mortgage company might only get 80,000 this could be because they they want to sell it quickly to recover their debt and minimise there long term loses in respect of this debt. Therefore there is a loss of 5,000 in addition to any arrears that have built up till that point.

With this in mind lenders take out a lump sum insurance policy on loans over 70% to 75% to cover them against this eventuality, generally YOU have to pay the premium for this plan.
Increasingly as the market has become more competitive for lenders they have decided to pay this policy for new borrowers but most only do this up to 90% over that level the borrower still has to pay the premium themselves.

One point that should be noted is these policies are for the benefit of the lender and carry no protection for the borrower. As such if the property does get repossessed and the lender loses money and then subsequently makes a claim the insurer can and will still go after the borrower for repayment of funds.

FSA declaration and important text about mortgage advice