What does Higher Lending Charge mean?

Some lenders require a higher lending charge in case the amount you’d wish to borrow actually exceeds the threshold the lender offers to give you the loan on. For example, most of the lenders have separate terms, conditions but most importantly differing fees in case you wish to borrow under 60% of the real market value of the property, or if you wish to borrow 75% and up.

Most usual is that they will offer you a loan not exceeding 75% of the market value, and any loan greater than 75% is subject to the higher lending charge. Also, it differs from one lender to the other what interest they charge for that respective higher lending charge.

For example, if the property’s valuation is £200,000 and you wish to borrow as much as 80% of its value, this means you should be eligible to receive a loan of £160,000. Given the fact that the higher lending charge threshold is set at 75% which is £150,000 anything beyond this sum is subject to paying interest. In the present situation, you pay a higher lending charge for £5,000.

Further, if the interest charged by the lender is 10%, that means the higher lending charge you will have to pay for is £10,000 x 10%, which equals £1,000. Next, you have two options: you may either pay this sum in advance, or if you do not dispose of the necessary money, this sum can be added to your loan but in that case it will be subject to paying interest, just like the whole of your loan. It is advisable that you try to look for lenders which do not ask for a higher ending charge; although rarely found but not impossible to.