100% Mortgages

When you come to buy your first home you may not have had time to save up enough money for a deposit. Unfortunately most UK lenders will only lend up to 90% of the cost of a property. The problem is that if you wait until you have saved the deposit for the property that you want the price increases that have been occurring in recent years could have completely put that property out of your reach. This is where a 100 % mortgage becomes an option.

100 % mortgages are offered by lenders in the UK who are happy to allow individuals to borrow the full value of the home they are buying. This type of property loan is especially popular with first time buyers. Although 100 % mortgages have advantages there are also some downsides to this type of borrowing.

Due to the problems in the 1980`s and early 1990`s many people still worry about negative equity, when the value of your property is worth less than the value of the remainder of your home loan. Taking out a 100 % mortgage puts you at a greater risk of going into negative equity. This can be a real problem if you need to sell your home quickly or if you find it difficult to make your loan repayments.

Currently house prices are rising due buoyancy in the market in certain areas. However some locations could be beginning to fall as prices become less affordable. The property crash at the end of the 1980`s led many lenders to become wary of offering 100% home loans. Many lenders came to believe that deposits were needed to give their customers a buffer against going into negative equity. As housing prices began to recover in the 1990`s some lenders started to offer 100% mortgages again. Some even offered up to 120% or more of a property's value to enable buyers to cover the costs of furnishing their new homes.

To get a 100% loan you may have to pay a higher interest rate which covers the lenders for the risk that they are taking. Rates for this type of loan can also be higher due to lack of competition in the market with only a few lenders currently offering This type of product. This type of loan can also be subject to a MIG charge - Mortgage indemnity guarantee. This adds a sum to your loan of several thousand pounds which covers the lender should you be unable to make repayments on your home loan and they have to sell your home for less than they are owed. 100% home loans can be a good option for people who can't afford to buy a house if a deposit is needed to make the purchase. But you should always seek independent financial advice before taking out any home loan to make sure you are getting the best possible deal.

100% Mortgages :