But most lenders require borrowers wanting 75 per cent or upwards of valuation to take out mortgage indemnity policies to protect the lenders against loss if buyers default and the property has to be repossessed. And mortgage indemnity guarantees can add substantially to the cost of mortgages, especially for first-time buyers, who are most likely to need 75 per cent or more of the valuation.
Policies only cover the excess value, and are invariably paid for by the borrower for the benefit of the insurer. Premiums range from 2 per cent to as much as 8 per cent on the amount covered.
A detailed study in the August issue of Your Mortgage magazine shows that seven lenders require MIGs for anyone wanting to borrow 75 per cent of the property valuation. Birmingham Midshires charges pounds 120 a year to cover a pounds 60,000 loan on a property valued at pounds 80,000, National Counties charges pounds 160, Coventry pounds 164, the Norwich & Peterborough pounds 176, the Lambeth pounds 200, the Homesdale pounds 350 and the Century Building Society pounds 530.
Fifteen lenders, including Barclays and Midland banks, the Royal Bank of Scotland and National Provincial Building Society, will lend 80 per cent of property values without a MIG. More than 50 others require MIGs on loans of 80 per cent, but premiums on a pounds 64,000 loan on the same house worth pounds 80,000 will range from pounds 119 at the Nationwide Building Society, pounds 120 at Alliance & Leicester, pounds 160 at Abbey National and Natwest Home Loans, and pounds 166 at the Halifax & Leeds, to pounds 184 at TSB, pounds 280 at the Skipton, and pounds 562 at the Century.
Just three lenders, Cheltenham & Gloucester, National and Provincial, and Royal Bank of Scotland, will lend 85 per cent of valuation without a MIG. The charges at other lenders range from pounds 180 at Cambridge Building Society, pounds 236 at Midland Bank, pounds 248 at Barclays, pounds 412 at the Halifax & Leeds, and pounds 480 at Abbey National, right up to the Lambeth, which takes over the top spot with an annual premium of pounds 720.
When loans reach 90 per cent of valuation, Cheltenham & Gloucester is the only lender not to require a MIG. Charges elsewhere for a pounds 72,000 loan on that same pounds 80,000 property range from pounds 400 at Yorkshire Bank and pounds 472 at Midland, up to more than pounds 1,000 a year at four small, risk-averse building societies - Birmingham Midshires, Norwich & Peterborough, Homesdale and the Lambeth.
On 95 per loans C&G remains the sole exception, and premiums required by almost 70 other lenders rise from pounds 600 at Yorkshire Bank to a huge pounds 1,600 a year at Birmingham Midshires, Lambeth, and Norwich & Peterborough. Just 11 lenders will give 100 per cent mortgages. Of these, Century Building Society is the cheapest, charging a premium of just pounds 850 on an pounds 80,000 loan. Midland Bank charges pounds 1,500, followed by Chelsea, Teachers and Abbey National, Natwest Home Loans, TSB, Nationwide, and Dunfermline, while the Royal Bank of Scotland and Yorkshire Building Society each charge pounds 2,400 a year.