Mortgage Indemnity Guarantee

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.

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