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What is a higher lending charge?
How much will the higher lending charge cost me?
How do I pay the higher lending charge?
Is the higher lending charge fair?
The higher lending charge (HLC ), formerly known as a mortgage indemnity guarantee, is an extra charge from your lender if the amount let exceeds a certain proportion of the property's value.
If you have taken out a loan that is worth over 90% of the value of your house then your mortgage provider may decide to add on a higher lending charge. The money from this charge can either be invested or used to pay for protection insurance that protects only the insurer. If you are unable to keep up with your payments and your house is repossessed and sold the Higher Lending Charge protects the lender from any losses in such a sale.
A higher lending charge, however, does not exempt you from paying back the shortfall made if you fail to keep up with payments. It is merely extra protection for the increased risk that a high loan carries. Top
The exact amount varies depending on the type of insurance and the amount being borrowed. As a rule of thumb, the charge is 8% of whatever amount over the percentage threshold you are borrowing. Top
A HLC can be paid off as either one lump sum or it can be added on to your mortgage repayments.Top
Many would claim that the higher lending charge is just unfair profiteering and that lenders shouldn't lend to people they don't think will be able to repay their loans.
The Nationwide Building Society, which does not charge HLC's, recently reported that during the last five years £1 billion has been charged in HLC's by around 800,000 borrowers.
Unfair as it may seem, however, many people would be lost without it. The higher lending charge allows people to borrow when they would otherwise be considered too great a risk. These people are given a chance to own their own homes and denying them that chance would also be labeled “unfair”. Top
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