Higher Lending Charges...

Some lenders charge a one off insurance premium, known as the higher lending charge, to cover themselves in any case of high risk lending, which is generally (but not always) defined as lending above 90% of the property value. This insurance does not benefit the borrower in any way, but covers the lender if, in the event of repossession, there is a shortfall in repayment of the outstanding debt. Were this situation to arise, the insurance company that provided the policy will often pursue the borrower for the equivalent of the money claimed by the lender.

The one off premium is usually added to the loan, rather than being paid upfront at the outset, and the borrower will therefore also be paying interest on this additional borrowing for the life of the mortgage, unless it is paid off with a lump sum or regular overpayments.

More and more deals are now being offered without an early repayment charge; in our experience many people (particularly first time buyers) are needlessly paying it. Occasionally, however, a situation could arise where the advantages of a particular deal outweigh the disadvantage of having to pay the premium. In this case we would clearly include the fee, along with all other fees, in our illustrations, and its significance would be explained to you in full at the outset.