Although now defunct, 100% mortgages used to be popular with 1st time buyers, offering a loan for the complete value of the property. Mortgage repayment rates for 100% mortgages tended to be higher than pretty much all other mortgages, but borrowers were made to understand that this was due, in part, to the extra risk on the part of the lender.
As well as the 100% mortgage, some lenders even offered to lend up to 125% of the value of the property, so the house buyer could purchase household goods, as well as pay for things like solicitors fees and valuations.
Back in 2006, roughly 2 percent of all mortgages were 100% ones. (Sourced from the Council of Mortgage Lenders)
Are 100% Mortgages Still Available?
In a word, No. the credit crunch has closed the door on 100% mortgages. Whether this is a long term thing, or just a temporary issues whilst the powers at be sort out the housing market and other issues, we do not yet know. Some people say we will see a return to 100% mortgages, whilst others are more sceptical.
The reason 100% mortgages are no longer available is pretty simple. Mortgage providers rely on borrowing money from other lenders at very competitive rates, who in turn rely on house prices rising steadily. Since October ’07, there has been a slump in house prices, to the extent that 1 year later, in October ’08, house prices were lower than 2007.
This has left some mortgages holders in ‘Negative Equity’ – a term used to describe having a mortgage debt that is higher than the value of your property.
If you came here looking for a 100% mortgage, do not despair. It would be wise to use a mortgage calculator to work out what you can or can’t afford, and what deal would be best for you.
Mortgage Calculators – What Are They?
A mortgage calculator is basically a tool that can be used to determine what your monthly repayments should be for any given mortgage. Some of the best mortgage calculators allow you to input the sum to be borrowed, the % rate that you have been offered, and the repayment period. The calculator will then give you details such as your monthly repayment amount, the total cost of the mortgage, and even the total interest paid for the mortgage.
It may be surprising what you find when you use one of these tools to work out how good the mortgage you are being offered really is – Seeing the figures in black and white in front of you in a concise table can really clear the fog somewhat.
About Credit Choices.
Creditchoices are a leading comparison site for finance matters. On their site you can compare everything from abbey mortgages to instant decision credit cards, and much more.
Creditchoices also have a plethora of facts and guides, in an effort to educate the consumer, so they can make informed and sensible decisions when looking for credit.