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What is a ‘low equity premium’?

Are you a homeowner with a small deposit or a low amount of equity in your property? Then you may have heard of a "low equity premium". But what is it exactly?

A low equity premium is an additional fee that some lenders charge borrowers who have less than 20% equity in their property. This fee is designed to protect the lender in case the borrower defaults on their mortgage. It's important to note that not all lenders charge this fee, and the amount can vary depending on the lender and the amount of equity you have in your property.

So, what can you do if you have a low amount of equity in your property and want to avoid paying a low equity premium? One option is to save up a larger deposit before buying a property. This can be challenging, but it can help you avoid additional fees and potentially get a better interest rate on your mortgage.

Another option is to look for lenders who don't charge a low equity premium or who have lower fees for borrowers with less equity. A mortgage advisor like myself can help you navigate the options and find the best lender for your situation.

If you're a homeowner with a small deposit or low equity then a low equity premium is something to be aware of but with the right planning and advice, you can minimise the impact on your finances and find the best mortgage for your needs. Get in touch if you’d like to discuss your options or chat further!

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