Problems with 100% mortgages

100_home-mortgage

If you are looking for a mortgage you might be tempted to go for a 100% one because it means that you do not have to save up for a deposit. However, if you can avoid doing this and put down some money, you may find that it is much better.

A lender will take a big risk by lending 100% of the mortgage required for a house purchase. They will want to make sure that they secure themselves in case you cannot repay the mortgage or go in to negative equity. To do this they will charge a high interest rate. This means that you could end up paying a lot more money, than you might if you put down a deposit.

They will also want to ensure that you have a good credit rating because that will give them confidence to lend you the money. This means that it might not be something that everyone will be able to take on. Unfortunately, if you have never had any credit, which could be the case for a first time buyer, then you may not be able to get this sort of mortgage. Only by applying for one, will you find out.

There are just a limited amount of 100% mortgages out there. There were quite popular a few years ago, but they have become very limited in numbers because of the economic troubles we are having. This means that there is not much competition between lenders and not many to compare. This can lead to high pricing, perhaps in the form of high interest rates or high costs.

This all means that you will end up paying a lot more money for your house over the mortgage length if you get a 100% mortgage. It can help you out if you are desperate to own your own house and cannot save up for a deposit but it can end up being really expensive. It is certainly a decision that you should not make lightly. It is worth weighing up all of the pros and cons before deciding whether to go ahead with this sort of mortgage.

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