This isn’t new news, is it? I thought it had become bank policy months ago…
independent.ie/national-news … 44130.html
Mortgage lenders to demand 20pc cash deposits
By Charlie Weston Personal Finance Editor
Wednesday November 19 2008
THE housing market suffered a new blow after it emerged last night that house buyers will have to come up with at least 20pc of the value of properties they plan to buy.
The move will mean buyers will have to produce deposits of €54,000, based on the average price of a house at the moment.
One of the largest lenders in the State, KBC Homeloans said it would now only provide mortgages for 80pc of the value of homes.
Mortgage market experts said other lenders were now likely to follow KBC.
One mortgage commentator said KBC (formerly called IIB Homeloans) was the first to state clearly that it would only provide mortgages for 80pc of the value of homes, but some other lenders are already insisting on deposits of at least 20pc of the value of the property before they will approve a loan.
Mortgage providers are demanding bigger deposits because they fear negative equity will wipe out the value of their loan books.
Job instability and the general state of the economy were other factors why Belgian-owned KBC was seeking higher deposits, a spokesman for the lender said.
Up to now KBC had been offering loans worth 92pc of the value of the homes it was financing.
It had been taking out insurance against losses on portions of mortgage where the value was more than 80pc of the value of the home, to protect itself against negative equity.
But upheavals in the insurance markets have made this insurance, known as a mortgage indemnity guarantee, extremely expensive.
The KBC spokesman denied the lender had been forced to demand higher deposits from home buyers because its indemnity insurance had become too expensive.
“The indemnity is a factor in the increase in loan to values but not the only factor,” the spokesman said.
The lender said it would make an exception for public servants and loan up to 85pc of the value of homes to them.
Mortgage broker Karl Deeter of Irish Mortgage Brokers said: “This is something which is likely to spread to other lenders and will have a massive impact on the mortgage market.”
Up to now buyers need to have a deposit of between 8pc and 10pc of the value of their home before they can secure a mortgage.
Charlie Weston Personal Finance Editor
Locked since this has already been posted. Do a search for “KBC” to find the original thread.
MI Insurance has been around for near enough 20 years at least , possibly even longer . It has been hidden from us in Ireland for years but of course it NEVER went away .
mortgagesorter.co.uk/home_mo … rance.html
What is mortgage indemnity insurance?
**This is one of those sneaky mortgage fees that goes by a whole raft of names.
You may hear it referred to as a mortgage indemnity guarantee (MIG), higher-lending fee or charge (HLC), additional security fee or mortgage advance premium.
**In a nutshell, it’s a form of insurance that you pay for but that actually benefits your lender.
It is designed to reimburse the lender if you borrow a high proportion of your property’s value typically 90 per cent or more and can’t keep up the repayments.
Roughly two-thirds of mortgage lenders will charge a mortgage indemnity premium for borrowing at this level.
How it works
If you fall badly behind with your repayments, your lender is perfectly entitled to evict you from your home and sell it.
Depending on the condition of the property or the prevailing market, it may end up selling for less than you owe on your mortgage.
It will then use the mortgage indemnity policy to make up the difference.
But that doesn’t mean you’re off the hook.
Chances are your lender will still come after you for the shortfall.
To find out more about this, read What happens if my home is repossessed?
Each lender works out these fees slightly differently, but **you can expect to be charged around £1,500 for every £100,000 you borrow. **
Once it was paid by the person taking out the mortgage and was an upfront insurance on amounts over 70% LTV or 75%
Then the banks started to absorb the cost and it is possible that the insurance was only required on 80%+ LTV
I feel that Austin is still paying insurance on 80% LTV mortgages but only on the portion between 70% and 80% of the LTV .
Therfe were some rumbling earlier this year that the banks, acting as a price fixing cartel, were all bringing Mortgage Indemnity back as an explicit upfront charge .
My memory of it was that in the 1990s it cost IR£350 to buy Insurance on only about IR£15,000 of difference between 70% LTV and 90% LTV on an IE£75k gaff , 2.5% of the differential upfront or so .
**If you borrowed less than 70% LTV No Insurance was payable . I am a bit confused about 80% . I reckon IIB areinsuring some of the risk themselves somehow .
Earlier discussion of Mortgage Indemnity this year in this thread below
Detailed Explanation here
mortgagesorter.co.uk/mortgag … orked.html
Here’s how they calculate it
Pay attention now, because this is quite complicated
Most lenders charge a higher-lending fee for loans of more than 90 per cent of property value.
**But they generally base the figure they charge on the proportion you’re borrowing over 75 per cent.
This means if you want a 91 per cent loan on a house worth £100,000, the higher-lending fee will be a percentage of the £16,000 difference between £75,000 and £91,000.
Different lenders use different percentages, but around 8 per cent is typical.
At this rate, the charge will be £1,280 for the privilege of borrowing £1,000 over the 90 per cent threshold.
If you want a 91 per cent loan on a house worth £150,000, this will rise to £1,920.
Here’s a sneaky trick
To make you feel better about paying such a whopping fee, your lender will probably offer to add it to your mortgage, so you can pay it off gradually over the mortgage term.
Of course, it will charge interest on it at the same rate as the rest of your loan, which means you could end up paying several times the original fee.
Obviously it affects FTBs more than trader uppers who are getting a second mortgage below 70% or 75% LTV .