Summary
With the higher lending charge, mortgage lenders have always had a good opportunity to take yet another payment from borrowers. This article examines the situation.
Mortgages. Will the charges ever stop?
Author - Anna Richardson
Saving for a new house is very difficult, those that could only stump up
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Many homebuyers don't realise that if they borrow over 90% or more of a property value, then there is an extra charge to pay. 75% of mortgage lenders ask borrowers to pay the higher ( term assurance ) lending charge, which averages out at around £1500. Basically, it's insurance to protect the mortgage lender. Because you are borrowing so much, they want to protect themselves against the risk of you failing to make your mortgage repayments. The charge is generally meaningless, because the lenders generally choose to cover the risks by their own means, If your home does end up being repossessed, and there is a shortfall when it comes to the sale, you can bet your bottom dollar that they will be still be after you to pay the difference!
They make it slightly easier for you, by allowing you to add to the charge on to ( insurance ) your mortgage. However, if you do that, you end up paying even more in the long run, because you have to pay interest on that too. That could mean another £2700 over 25 years.
We think that the higher lending charge is an antiquated and unfair charge. The lender has every opportunity to check out your finances and ensure your credit record reflects that ( car insurance quotes ) you are a decent and timely payer. It is not fair for them to add on an extra charge in case you find yourself unexpectedly, unable to meet your payments. It is even more unfair taking into account the extra charges that you will undoubtedly pay for choosing a mortgage of over 90% in the first place.