100% mortgages may sound like a myth and perhaps too good to be true. Can you really get a mortgage while putting down no deposit? This is an enticing idea particularly when you consider how difficult it can be to save the money for your first home.
Well, you’ll be pleased to hear that 100% mortgages are very real. However, there are a few facts you need to know about and some points to consider before you rush out and get one yourself.
Conditions For 100% Mortgages
It’s important to be aware that 100% mortgages aren’t quite as they sound. While you can get the mortgage without putting down a deposit yourself, someone will still need to provide capital. This will be a parent or a family member who has the finances for a typical mortgage. Generally, they will be required to put down 10% of the total purchase price.
This is not a standard deposit and instead is used as security for the loan. Due to this, the loan is stored in a three year fixed term savings account or a similar scheme. When the three-year term ends, the money is provided back to the family member with interest gained over that period.
Who Offers This Type Of Mortgage?
There are various banks that offer this type of mortgage. One example would be Lloyds. They provide the deal described above but it is only available for first-time buyers.
Alternatively, if you are instead looking to invest and grow your real estate portfolio, Barclays Family Springboard mortgage might be the perfect option. This is available for more than just first time buyers.
They’re not alone either. If you have a family member that is willing to provide equity for the loan, then Aldermore, Buckinghamshire Building Society and Loughborough Building Society all offer this type of loan as well.
The Real 100% Mortgage
You might think that these offers are not a true 100% mortgage and you would be right. So does a real 100% mortgage where no deposit is necessary actually exist on the market? Unfortunately, this is not a real possibility. Instead, most lenders will offer is a 95% mortgage. You should also be aware that while these mortgages do often provide incentives to get the greatest range of mortgage possibilities, you need a greater deposit than five percent. You should be aiming for anything up to 20%. This is the best way to gain the cheapest monthly repayments.
Who Is The 100% Deposit Suitable For?
Anyone who is struggling to save a deposit and does have parents who can lend a hand will benefit from this type of mortgage. Particularly if the parents are keen to see a return on any investment they make to get their child on the property ladder.
However, you do need to be aware of the danger here. If home prices dropped, and the home was put up for sale, you could potentially find yourself with negative equity and stuck with a property you didn’t want or couldn’t afford.