Glossary - Mortgage Indemnity Guarantee Premium

Mortgage Indemnity Guarantee Premium or MIG Premium is a fee charged by a mortgage lender.
This is a form of insurance taken by the borrower for the protection of the lender. It is a single premium policy added to the amount of the mortgage. It insures the lender against losses in excess of the standard loan to value sum which is usually set at 75%.

If a lender decrees a maximum percentage loan to value of 75% but the borrower requires a loan of 90% then A Mortgage Indemnity Gurantee Policy would be taken out for the difference, i.e. 15%. The policy would be written with the insurers and it would cover the lender for this amount should the borrower default and the property be repossessed.

If, after repossession, there is still a mortgage loss to the lenders, they can sue the borrower under the mortgage contract. The insurance company which has underwritten the Mortgage Indemnity Gurantee may cover the lenders' loss but would still be entitled to pursue the borrower for re-imbursement. This condition imposed by lenders has been criticised in the past but as yet has not been changed but it may well be in the future.

Example: MIG Premium
If a consumer has to have their property repossessed the mortgage lender could find that they are able to recover only a percentage of the value when it is sold especially if the property market is not good at this time.

The lump sum insurance policy covers the lender against being left with any irretrievable debts. Normally the consumer would have to pay the MIG premium but as the housing market becomes very competitive some lenders will pay up to 90% of the propertys' value for them, over this level the borrower will have to pay the charge themselves.

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