A higher lending charge, also known by the acronym HLC, is a charge applied by lenders when the loan extended to a borrower reaches a higher percentage than the typical percentage of the property value in question. A common percentage is 90% of the property value, so if you take out a loan covering more than this, it is liable to incur a higher lending charge.
The value can also be applied to the amount you buy the property for, rather than the valuation attached to it. For example, a house may be valued at £300,000, but your offer of £295,000 is accepted. If you ask to borrow over 90% of that offer amount, the higher lending charge is likely to be applied.
The fees incurred for this are usually at a greater percentage rate than the term given for the rest of the mortgage. The charge only applies to the amount over the threshold. For example, if you bought a property for £295,000 with a loan for 85% of that amount, no charge would be applicable. However, if you could only provide a 5% deposit, you would need a 95% mortgage deal. This would mean the additional portion of the loan required over the 90% threshold would have the higher lending charge applied, rather than the whole 95%.
Buyers looking to borrow more than 90% of a property value may be asked to provide insurance. This is designed to cover the lender in the event you cannot meet your repayments and your property is repossessed. It represents the greater risk involved in loaning you more than the usual percentage the lender would be willing to provide.
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