WHAT IS LEM and LEP?? If you manage to take out a loan greater than 80% of the value of your home then a LEM (Low Equity Margin) and / or a LEP (Low Equity Premium) are likely to be applied by the bank.
LEM is an additional percentage added to the market rates of interest charged by the bank. The percentage varies depending on how much more than 80% you borrow but could range between an additional 0.25% to 0.65%. Good News - once the equity in your home is 20% or more the LEM can be dropped :).
LEP is a fee charged by the bank and is added to the loan. The bank may also add a LEM so borrowing > 80% can be an expensive business.
The reason LEM's and LEP's are added to your lending is based around "Risk vs. Reward" theory, i.e. a greater percentage of lending carries more risk so, as a result, banks expect a higher return.
If you would like to speak with mortgage expert in Napier, Hastings about LEM or LEP click here or phone 027 573 7971.
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