Mortgage Indemnity Guarantee
A mortgage indemnity guarantee is a form of insurance designed to protect the lender who has granted the mortgage to the homeowner to buy their property. Not all property purchases with a mortgage attached require this guarantee. It depends on the loan to value ratio for an individual situation. The higher the LTV is, the more likely it is your lender will require you to take out suitable indemnity insurance before they will agree to provide your home loan. Typically, the LTV value is of around 75% or more in this case. The insurance is also sometimes referred to as a Higher Lending Charge or as an MIG policy (mortgage indemnity guarantee).
The most important element to remember with this type of insurance is that it works in the opposite manner to most other insurance policies. If you insure yourself against loss of some kind, that policy is going to pay out for you if you find yourself in the conditions covered by the policy. For example, if you pay for contents insurance, that insurance policy pays out if your home is broken into and items are stolen.
A MIG policy does not work the same way. In this case, you take out the policy and pay for it as you would with any other policy. However, since it is designed to protect the bank or building society lending you the funds to buy your home, they are the ones who would benefit from a payout if something went wrong and you could not meet your mortgage payments. The amount you would pay for the policy depends on the provider, but it usually represents a percentage of the loan amount that goes above 75% of the loan to value ratio.