100% Mortgages
100% mortgages are, as the name suggests, mortgages where the lender allows you to borrow 100% of the value of the property you wish to buy. This is particularly good for first time buyers who may lack the necessary funds to pay a 5% deposit plus other costs associated with buying a property or for when you’ve seen that dream property but you just haven’t got enough money saved up.
You'll get it immediately to help you get the best valuation possible.
We value your privacy and will not share your details
If you are thinking about a 100% mortgage, then there are three considerations. First of all, take note that you will probably be charged a higher interest rate than if you took out a mortgage where you paid a deposit. This is because there are not many lenders offering 100% mortgages in the marketplace, so their deals do not have to be so competitive.
And, if house prices fall, you will find yourself in negative equity faster than your contemporaries who have borrowed less. (Negative equity is where your house is worth less than the amount you owe the lender).
Finally, you may well be charged a mortgage indemnity premium. This is because you are borrowing 100% of your new home’s purchase price. The mortgage indemnity premium could cost several thousand pounds and that amount will either be added to your loan or borrowed from elsewhere.
There are several mortgage lenders who offer 100% mortgages, (ie they will advance the full value of the property to borrowers). However, anyone considering a 100% mortgage should be aware that they risk starting their home ownership in negative equity if house prices suddenly drop.
In fact, after the house price crash of the late 1980’s, many lenders stopped offering 100% mortgages, as so many people found themselves in a negative equity situation. However, lenders seem to be comfortable once again with lending 100% of the price of a property and there are even some loan providers who will offer up to 125% of the value of the property.
This is because there is such a need for 100% borrowing. Quite simply, many people cannot afford to buy a property without them. With house prices rising, borrowers are concerned that they will never be able to afford a property.
By the time they have saved up the money needed (such as the 5% deposit plus money for associated costs) the house prices have risen and they need to start all over again but, this time saving an even bigger deposit.
