These can also be known as a high Loan to Value (LTV) fee, additional security fee, maximum advance premium or a high lending fee to name a few.

If a lender loans more than 75% of the value of a house, they run a greater risk of you getting into arrears. To cover this extra risk they may take out an insurance policy, the cost of which is passed onto you in the form of a Mortgage Indemnity Guarantee. Most lenders will charge you this, although some may only charge if they are lending 80% or 90% of the purchase price. The cost will be a percentage of the excess money they are lending according to their terms.

For instance:

Your house purchase price is £100,000 and you can pay a 5% deposit of £5,000. The lender’s policy is to charge a MIG on anything over 75% of the purchase price.

After taking your deposit into account, your outstanding amount above their limit will be £23,750.

Therefore they may charge you a MIG of 4% of £23,750 which gives you a premium of £950 to pay.

This is only an example and MIGs can be charged at higher rates.

Consumer groups are moving to get this fee scrapped now, as it protects the lender not the borrower and adds to the costs of vulnerable clients, such as first time buyers.