A Mortgage Indemnity Guarantee (M.I.G), also known as a mortgage indemnity premium or high loan-to-fee (L.T.V), is an insurance policy for the lenders, but the mortgage policy holder pays.
If you want to take out a mortgage with a high L.T.V., i.e. the amount of the mortgage is close to the value of the property you are buying, the lender will insure itself against any default.
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The amount at which you have to pay a M.I.G. will vary from lender to lender, but as a rule, if the lender does levy such a charge, they will do so at a L.T.V. of 85 per cent or more. It's usually charged as a percentage of the loan, and all lenders calculate their fees in different ways, so you need to check with your lender.
While it's always in your best interest to pay the lowest rate possible, and have the highest deposit, you should understand that mortgage rates are almost always much cheaper than other forms of borrowing. So if you have a large deposit but have other borrowings, it may make sense to put down a smaller deposit while you paying off your other debts.
As the value of your home starts to rise, your L.T.V. will be lower when it comes to remortgaging your house. If you've managed to make all your payments on time, the two together will make you a much more attractive prospect to lenders, which should reduce your rate.
Mortgage Indemnity Guarantee
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