100% Mortgages

100% mortgages, sometimes referred to as a no deposit mortgage, allow you to be able to borrow against the full value of the property.

This would mean that with a 100% mortgage, no deposit is required.

Most often mortgage lenders will only lend 90% of the cost of the home. Understandably not everyone is willing to wait until they have saved up the remaining percentage. If you look around you will find 100% mortgages available. 100% mortgages come in many different formats including fixed rate, discounted rate, capped or variable rate. Often 100% mortgages require a good credit background. However, there are lenders who can provide 100% mortgages for poor credit applicants even with ccjs. 100% mortgages are useful to first time buyers, but they do have disadvantages. If you have taken out a 100% mortgage and should house prices then drop your equity will be at risk. This means that if you need to sell your home the 100% mortgage taken out on the original value of the property would outweigh the property's new value.

Lenders ensure they cover themselves for the risk of offering 100% loans and will quite often charge a higher interest rate, this means that you will be paying more each month than you would with a traditional mortgage. In some cases, your mortgage lender can even provide a 125% mortgage, giving you some extra money to spend on your new home after you buy it.

It should be noted that 100 mortgages are not suitable for everybody's needs, in a falling property market you may end up owing more than your house is worth, i.e. a "Negative Equity Situation", and you should obtain professional advice before deciding on which type of mortgage is most suitable for your needs. When the property market is suffering a decline and property prices start to fall, 100% mortgages will be hard if not impossible to find, lenders will not be unwilling to take risks.

Always understand that should you not be able to keep up your payments your lender can legally repossess your property and resell it in order to recoup the debt they are owed.

 

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Related glossary terms to UK Mortgages:
Adverse Credit | Credit Checks | Building Reports | CCJ's | Defaults | Arrears | Bad Credit | Buy to Let | APR | Estate Agents | Early Redemption Penalties | Exchange Contracts | Gazumping | Loan To Value | Mortgage Term | Negative Equity | Stamp Duty | Bank of England Base Rate