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Mortgage Information - Mortgage Indemnity Insurance


Mortgage Indemnity Insurance - Mortgage Information


What is Mortgage Indemnity Insurance?

You pay for Mortgage Indemnity Insurance but it only protects the lender if you can't pay back the loan. It is often compulsory if the loan to value ratio of your mortgage is above 95% - which can hit first time buyers. Some mortgage lenders charge it from an 80% loan to value, other lenders don't charge it at all - although it may be hidden and you are paying for it through a higher interest rate.

If you don't keep up your mortgage payments and your house is repossessed and sold for less than the money still owed on the mortgage then the lender is insured against that loss. But the insurer may be able to claim the loss from you many years later. Mortgage lenders can chase debts up to 12 years old, unlike the standard 6 years for the rest of UK businesses. Years later, after you've sorted your finance problems out, the lenders will try and get it from you with interest.

Mortgage Indemnity Insurance can cost up to £1000. Most borrowers don't realise that it doesn't protect them at all and a recent trend is that the better mortgage lenders are starting to do away with it. Some lenders however still make it compulsory.

How to avoid paying Mortgage Indemnity Insurance
Some mortgage lenders don't seem to charge Indemnity Insurance - but actually they are hiding it by making you pay a higher interest rate or some kind of tie in.
You could check at what level of loan to value it kicks in and borrow just below that threshold. It usually works out about £10 on a £100,000 mortgage.

List of Major Mortgage Lenders


OCIS provide general financial information, we urge you to consult an Independent Financial Adviser ( IFA )
before making any important decisions about your finances.