Mortgages. Higher Lending Charges are outrageous.

Summary

Higher Lending Charges are often charged if your mortgage is 90% or more of your propertys value. We think the charge is a form of profiteering by the lenders and should be abolished. This article explains why.

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Author: Michael Challiner

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After you scraped together a modest deposit for your new home you may think youre home and dry. Think again. On top of theres the surveyors and ( cheap mortgages ) solicitors to pay. Then the government want a slice. Youve got to pay stamp duty at 1% of the propertys price (if the house costs more than £250,000 the rate of stamp duty increases – see the information at the foot of this article). Phew! Youre lucky youll just make it – youll be a homeowner at last! (cheap health insurance)

Then out of the blue the mortgage lender sends you a new bill – another £1,500 please Sir. Theyve called it a Higher lending Charge (HLC) and its charged if you borrow more than 90% of the value of the house. About 75% of all mortgage lenders charge it and £1,500 is about the average they ask for.

And guess what – they money you pay wont benefit you in any way whatsoever! Not one jot. Youre being charged for a form of protection insurance that protects the mortgage lender, ( online car insurance ) not you. The HLC pays the lender if you default on your mortgage, your property has to be repossessed and the sale proceeds are less than the outstanding balance on your mortgage. In theory the HLC then pays out the shortfall to the lender but in practice many lenders carry the risk themselves so the HLC is just an extra fee to offset a higher lending risk.

But an HLC doesnt let you off the hook! If your home is ( car insurance policy ) repossessed and theres a shortfall, you still have to pay the shortfall back to your lender - theyre sure to chase you for the money. (life insurance quotations)

Whilst most of the lenders who charge HLCs will readily agree to add the charge to your ( mortgage rates ) mortgage, thats little consolation. In any case this means that youll end up paying interest on top of the charge. Then, over a 25-year term, your HLC will have cost you closer to £2,700!

In our opinion HLCs should have died out with the dinosaurs. If a ( term assurance ) lender is worried youll default, they shouldnt have lent the money in the first place. And with all todays hi-tec credit checks and the risk based assessments used to process your application, youd think the lenders were doing enough to protect themselves. In any case you may also end up paying a small interest premium for a 90% plus mortgage – so in practice youre being charged twice for the same risk!

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