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MORTGAGE INDEMNITY - MIGP

Mortgage indemnity guarantee premium (MIGP) - This is a single insurance premium that becomes payable by the borrower when borrowing normally in excess of 75% loan to value in respect of both a purchase or re-mortgage. It can be a significant cost and therefore it is important to establish the cost of MIGP when comparing mortgage lenders and before agreeing to proceed with a mortgage. The premium becomes payable as a one off lump sum on completion of the mortgage although some lenders will offer alternatives such as adding the MIGP to the loan or spreading the premium over the first 12 months of the mortgage.

Borrowers should be aware that if the premium is added to the mortgage they are effectively borrowing more money and will therefore be paying interest on the premium for the term of the loan.

Some lenders no longer charge MIGP, although others may charge from 70% loan to value, there is a growing trend towards many lenders not charging MIGP providing the loan to value is 90% or lower. As an example you may be considering two lenders who offer the same or similar interest rates and you have a 10% deposit i.e 90% loan to value. One lender may have an MIGP costing ?1000 the second lender may not charge any MIGP.

The premium itself protects the lender against the borrower defaulting on the mortgage and making a loss following repossession and resale of the property. The insurance offers no protection to the borrower.

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