Are 100% Mortgages Still Available?
If you are looking around for a mortgage, one of the most important considerations is always going to be how much of the value of the property you are trying to claim for. This obviously gets balanced against the deposit and whatever other security you can put up for the loan.
You might have heard in the past of 100% mortgages – but are these a thing of the past, or is it still possible to get a mortgage without putting down any deposit at all?
What Is A 100% Mortgage?
Essentially, a 100% mortgage is any property loan where the lender pays out 100% of the property value, without the borrower having to put down any additional security or any deposit at all. As you can imagine, this is very risky for lenders, and can be costly – which is why these might seem to be a thing of the past.
What Are The Disadvantages Of 100% Mortgages?
For the lender, such mortgages pose a huge risk, as they are paying out a lot more money and without any notion of whether the borrower will be able to repay it whatsoever. Clearly, that can be troublesome for them.
But on the borrower’s side it can be fraught with difficulties too. After all, a mortgage of that size means a much larger overall debt, which will certainly take longer to pay back and may even be more expensive to pay back too.
The New 100% Mortgage
Although that traditional kind of 100% mortgage is very much in the past, there is just now a new kind which is cropping up from place to place. This normally involves a ‘temporary deposit’ of around 10%, which has to be provided by someone else, such as a relative, rather than the individual applying for the mortgage.
The deposit will be placed in a savings account built just for that purpose for three years, to act as security. Then it may be withdrawn again.
What Is A No Deposit Mortgage?
There are a few common types of no deposit mortgages, where no deposit is needed in order for the mortgage to be taken out. Often, there will be other forms of security in place for these to work.
Some of the common types of no deposit mortgage include:
- Government Mortgage Guarantee Scheme. In this scheme, the government provides security, so that lenders can offer 95% mortgages.
- Right-To-Buy Mortgages. Sometimes, a lender will allow you to use right-to-buy as the deposit.
- Guarantor Mortgages. With a guarantor, it is possible to get a mortgage without having to pay the deposit yourself. This method is less common these days, but still possible.
- Gifted Deposits. Of course, if possible, it is an option to receive a deposit gift from a relative or friend.
- Help-To-Buy Mortgages. These can be taken with as little as 5% deposit, but are restricted to new builds under £600,000.
If you would like to find out more, or you need some advice on your mortgage, get in touch with Get in touch with our mortgage broker Market Harborough today, or take a look at the other areas we cover.