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Some mortgage lenders only offer up to 90% loan to value. That means that they will loan you up to 90% of the properties value. First time buyers can find this particularly difficult as they then need to save 10% of the properties value before they can buy a home.

However, subject to your income, many lenders will now provide 100% mortgages, the full purchase value of the property. Even though 100% mortgages have advantages, there are also some disadvantages you should be aware of.

Negative equity

Negative equity is when the value of your home is less than the value of your outstanding mortgage. Clearly, 100% mortgages are in particular danger because, if the value of the house fell, you would immediately fall into negative equity. In practice this only becomes a problem if you want to move home or remortgage as you would then have to make a lump sum repayment to your lender equal to the value of the negative equity.

High Interest Rate

A 100% mortgage means you will have to pay an above-average interest rate. With 100% mortgages the lender is at much greater financial risk if house prices fall. By charging a higher rate of interest the lender can protect themselves against this increased risk.

Mortgage Indemnity Guarantee

A mortgage indemnity guarantee is actually an insurance policy which is for the lenders’ sole benefit. It protects the lender against any financial loss occasioned by negative equity - it does not protect you! If you are in a negative equity situation and owe your lender the balance of the mortgage, you will still be required to pay the money back to the lender whether or not the lender has the benefit of a mortgage indemnity guarantee.

Mortgage Indemnity Guarantees can add several thousands of pounds to your mortgage.

If you are interested in a 100% Mortgage, you should talk to a professional mortgage broker. Ask for a quote now and a Mortgage Adviser will phone you with the next 24 hours.
 
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