What Is A Mortgage Insurance Guarantee Premium Question AnswerDocument Transcript
What is a Mortgage Insurance Guarantee Premium?
We are buying a house for £145,000, but do not The MIGP provides no protection for you.
have a deposit. We have been told by our Indeed, if the insurance company has to pay
bank that they will provide a 100% mortgage, your lender, they have the right to take legal
but we have to pay a mortgage insurance action against you to recover their loss.
guarantee premium (MIGP) of £4,350, which
can be added to our loan. This seems Unfortunately, like most insurance, you receive
expensive. What is the money for, do we need no refund if your lender does not claim on the
to pay it and what does it cover us for? policy. The premium can either be added to
the loan or paid in cash (most people add this
to the mortgage - if you had the cash in the first
Answer place, you wouldn't be looking for a 100%
The market for 100% mortgages is limited. There loan).
are a lot fewer lenders for you to choose from.
Lenders look for a degree of comfort. They feel Adding it to your mortgage does mean that
that there is more chance of a client not you will also pay interest on the amount over
keeping up loan repayments when they have the term of the loan. The interest payment on
either no deposit or a small deposit. your MIGP will cost you an additional £260 in
the first year (based
A MIGP is a single-premium on current interest
insurance policy that rates). The only way to
protects the lender. escape the fee is
either to obtain a
deposit large enough
to avoid the charge
Lenders got their fingers burned in the 1980s (the vast majority of
when house prices fell and people lost their lenders impose no fee
jobs and were unable to maintain their if you have a 10%
mortgage payments. Those lenders that deposit) or to choose Andrew R Dawkins ACII,
provided high-percentage loans found that one of the small Chartered Insurer
they were losing money as the property they handful of lenders that (Independent Financial
owned was worth less than the mortgage do not impose a MIGP Consultant)
secured on it. at 100% lending.
As a consequence, some lenders decided not
to lend to customers with small deposits, and To ask a question about your
those lenders that stayed in the market for 100% mortgage or any of your financial
loans imposed MIGPs. A MIGP is a single- needs, call A.R.D. Consultancy on
premium insurance policy that protects the freephone 0800 028 4258
lender. It provides the lender with an important
safeguard - if the lender has to repossess a
home because of non-payment of the Brought to you by Andrew R Dawkins ACII,
mortgage, and if the property is sold by the Chartered Insurer (Independent Financial
lender for less than the mortgage outstanding, Consultant). For more advice on all your
the insurance company will make up the financial matters visit A.R.D. Consultancy at
A.R.D Consultancy. Suite 8, Callendar Business Park, Falkirk. FK1 1XR
Freephone 0800 028 4258