What is a 100% mortgage?
A 100% mortgage is one where you put no money down as a mortgage deposit and the lender gives you the whole property price as a mortgage. These used to be very common before the financial crisis but they are very rare now.
100% mortgages are very similar to guarantor mortgages as they lender will usually request some collateral upfront. Your guarantor will need to put their house down as collateral or a huge amount of savings in a bank account controlled by them.
If you default on your mortgage repayments then your guarantor could lose their home through a repossession.
Advantages of 100% mortgages
100% mortgages give an avenue for first time buyers to get on the property ladder
Disadvantages of 100% mortgages
These mortgages are considered very risky by some
If property prices fall you may end up owing more than your property is worth. This is known as negative equity.
The interest rates on a 100% mortgages are known to be very high as the loan to value is 0%.
There are very few of these products and hence it will be harder to compare against other products
These mortgages are usually expensive to arrange and have higher mortgage arrangement fees. The mortgage lender will also request a Mortgage indemnity guarantee which protects the lender in a case you default. This will be at a cost to you.
Although low mortgage deposit mortgages appear cheap, the consequences might end up being way too much. Request the services of a good digital mortgage broker to advice you on low deposit mortgage you may be eligible for.
You should also consider home buyer Government mortgage schemes such as the help to buy equity loan and the shared ownership scheme.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.