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  • Mortgages & Finance

    Mortgage Indemnity Guarantees

    Hi,is anyone familiar with "Mortgage Indemnity Guarantees"(MIG-may be under a diifferent name),suitable for deposit shortfalls for HMOs + BTLs.Understand they were quiet common a decade or so ago.

    Advice,and details of companies offering this kind of service would be appreciated.

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    I've not seen them advertised in years, i think they went at the time of the crash.
    If I remember rightly they brought down or nearly brought down some big insurance firms.
    Others has projected losses so high that they closed doors and did not pay out.

    Why you ask?

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    The above post is not financial advice, its often me rambling - passing time on a coffee break.
    If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance.


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    MIG was common in 1980s/90s for residential mortgages for higher salary multiple loans - with a lump sum premium charged at outset.

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    MIG premiums were for the benefit of the lender not the borrower (Although the borrower paid the premium).The product was designed to meet any shortfall the lender might have after a repossession sale.The lenders usually only required MIG above 75%LTV which was wise at the time with the number of 100% LTV mortgages being sold

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    Hi Anwar,

    Well that is what some might say a blast from the past and this might not be helpful at all!  Lenders used to use these and charge them to borrowers.  If my memory serves me right the idea was that a lender could do what it wanted up to 75% loan to value but should someone want to borrow above that then they would have to indemnify themselves for the amount above 75% should the property get repossessed and they make a loss.  That was how things were often done for years before two things – first the industry got better and cheaper ways of securing mortgage finance (although not all proved to be genuinely good in the long run) – second, and this is just a rumour I heard decades ago…one lender renamed their MIG premium so it wasn’t called a MIG, charged the borrowers but never purchased the actual indemnity policies and effectively self-insured themselves – but got found out when they tried to take a borrower being repossessed to court who quoted that they shouldn’t be chasing them, they should be claiming off their MIG policy, which apparently didn’t exist.  If that story is true, I doubt they were the only lender (and I cannot say the lender name as I cannot corroborate this story at all).

    Your post mentions HMOs and BTL deposits but I apologise as I don’t know if you mean your tenant’s deposits or the deposits for the properties you are buying.  Can’t comment on the former as there are official tenant deposit schemes etc and you should talk to lettings agents about those perhaps.  But, as a mortgage broker I am not sure if any lenders will accept a MIG type policy in lieu of an actual cash deposit.  I could be wrong but I have never heard of it and we deal with a lot of lenders.

    I hope it helps a bit at least,

    Cat

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    Call the PT Broker Hotline on 0333 363 6507 or email us at ptbrokers@johncharcol.co.uk


    I believe that lenders still use MIG'S but no longer charge the borrower for these.  As has been said earlier in this post, there was no requirement up to 75%LTV, but anything after that needed to be covered by a policy.

    I suspect that lenders no longer ask the borrower to pay for this, as the policy protects the lender and not the borrower.  I guess there is an element of adverse publicity for other lenders, once the big lenders started paying for their own policies.

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