100% Mortgages Now Available for First-time Buyers

Any first-time buying well know that mortgage rates have practically gone through the roof since the government’s disastrous mini-budget last September. Not only has it made things harder for first time buyers, but it has also made the market precarious.

Luckily, first-time buyers can now get their hands on 100% mortgages. These mortgages offer a budgeting loan for the entire cost of the property you intend to buy, meaning that you don’t have to fork out a hefty deposit.

Attractive they may seem, but are these mortgages really benefiting first-time buyers?

What is First-Time 100% Mortgage?

There’s no mystery why such mortgages are so popular with first-time buyers. And since they are a relatively new scheme, there is only one kind of 100% mortgage on the market: the guarantor mortgage. These come in a number of different forms, but they all require you to have a family member who can support you financially.

In this case, your family can offer you their savings or property (or both) to secure your mortgage. Then, your family must deposit 10-20% of the property’s value in a dedicated savings account. This will earn a small amount of interest over time.

The cash is held in the account until you’ve paid 20-25% or your mortgage. It is also released when years have passed or you’ve repaid the loan in full. So, you can expect that money to sit in the savings account for quite a while.

If your family wants to use their property as security, they can provide a charge over their own home at approximately 20-25% of the value of your mortgage.

Pros and Cons

The most obvious pro of the 100% mortgage is that you can now buy a home without paying a deposit. Additionally, since this is a relatively new scheme, lenders are developing more 100% mortgage schemes that might offer exactly what you need and work perfectly with your situation in the future.

There are, however, a few more cons than pros. The biggest pro is that is relies on having a family member who has sizeable assets and can support you if needed. Such a mortgage can also put their savings and home improvement at risk whilst offering an uncompetitive interest rate on their savings.

And whilst it is particularly hazardous for the guarantor, even getting approved for a 100% mortgage is difficult. What’s more, you are always running the risk of running costs into negative equity, which could be disastrous.

In such cases, make sure you’re legally covered. About a third of all agreed property deals fall through, and when this happens, ensure that you have adequate legal advice to see you through.