Do 100% Mortgages Still Exist?
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Are 100% mortgages still an option?
Buying a house can be an exciting prospect, but it comes with a lot of difficulties and challenges too. Finding an appropriate mortgage for your needs is a particularly challenging aspect of buying a house, especially if you do not have a deposit saved up.
Currently in the United Kingdom most borrowers need a 5% deposit of the purchase price on their house to get a mortgage. Due to this the only way a borrower can get a truly 100% mortgage and avoid paying a deposit is by having a guarantor who will assume responsibility of the loan if the borrower cannot meet their payment obligations. These guarantors are usually family members or partners with the means of supporting the borrower in times of financial difficulty and someone who the borrower can trust.
What is a 100% LTV mortgage?
LTV stands for Loan To Value. 100% LTV means that you borrow the entire cost of the property you want to purchase. This may be convenient if you do not have a mortgage deposit saved up. However you will need a guarantor to cover you loan if you are unable to meet payments or risk having the provider reclaim your home under the 100% value of the mortgage.
What are the downsides of 100% LTV mortgages?
A 100% LTV mortgage usually has a higher interest rate than a mortgage where you pay a deposit. This is because people with 100% mortgages are considered a higher risk to the mortgage lender, who may worry about you and your guarantors ability to pay it back.
Can you still get a 100% LTV mortgage?
100% LTV mortgages are rare in the UK however some mortgage providers still offer them. Given the risk associated with these loans and the higher interest rates it is generally advised that borrowers consider other mortgage options.
Is a 100% LTV mortgage still secured?
Yes, a 100% LTV mortgage is still a type of secured loan – this means that the house is considered an asset that can be reclaimed and sold if you fail to pay back your mortgage loan.
Do I need a guarantor for a 100% LTV mortgage?
Since a 100% Loan To Value mortgage is a higher risk for the lender, many UK mortgage providers will only offer them if the borrower has a guarantor who will guarantee the loan. This means that someone else signs to agree that they will pay off the loan if you cannot. This can be a difficult thing to get help with, as people with too much debt may not be considered suitable to be guarantors.
Can a first time buyer get a 100% mortgage?
A first time buyer may be able to get a 100% LTV mortgage with certain mortgage providers. You can compare mortgage quotes and deals in order to see what options are open to a first time buyer. You may find that you need a guarantor to be able to get a 100% Loan To Value mortgage as a first time buyer.