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100 per cent mortgages

A guide to 100 per cent mortgages

This type of mortgage where you could borrow the full purchase price of your new home was extremely popular before the UK credit crunch, when 100% mortgages were a niche product.  They grew in  popularity during the property boom in the early part of the 21st century.

The reason for their popularity was that they allowed borrowers who did not have any cash for a deposit to borrow the full purchase price. They were mostly chosen by first-time buyers who often struggled to get on the property ladder without  a 100% mortgage.

Today, however, it's now nigh on impossible to get a 100% loan.

Even before the credit crunch in late 2007, lenders offering 100% mortgages were few and far between. In rare cases, lenders offered more than the full purchase price, with mortgages up to 125% available.

Update: The credit crunch of 2007/2008 had a major impact on 100 per cent mortgages and 100 per cent plus mortgages. With tighter lending criteria and tougher market conditions, mortgage lenders generally no longer offer them. But you may be able to get one from a specialist lender in rare instances. 

Now mortgage lenders generally require a deposit.  A few deals for those with a 5% deposit are available, but the bulk of the offers are for home buyers who have a deposit of at least 20 - 40%.

What are 100 per cent mortgages?

100 per cent mortgages are mortgage loans that cover the full purchase price of a house. They are chosen by borrowers who can't raise a deposit.

Why doesn't everyone opt for 100 per cent mortgages?

Firstly, they're almost impossible to find and there's a good chance you will be turned down for100% mortgage loans even if you can track down a lender offering them. Home buyers usually only go for this type of loan if they have no deposit, as the interest rate will be much higher than a standard mortgage loan where you can put down some of your own cash.

Do higher lending charges apply to 100 per cent mortgages?

If you can find a 100% loan, you will not only pay a higher interest rate but you will probably also have higher lending charges (HLCs) also known as mortgage indemnity guarantee premiums.  Many lenders allow borrowers to add their HLC to their mortgage. This is not a good idea as you'll be paying interest on the HLC until your mortgage is repaid or you remortgage to a better deal.

Are there many 100 per cent mortgage lenders?

No. Today, unless you've got a deposit, you will find it hard to get a mortgage.   The harsh fact is that the only answer is to save up a deposit so you can get a home loan.

What types of 100 per cent mortgage are available?

All the usual types of mortgages are offered when you can find a lender with 100% mortgage deals, although the safest are generally considered to be fixed or capped mortgages. That way, if interest rates rise, you are not faced with crippling repayments.

How should I go about getting a 100 per cent mortgage?

For more information about the mortgage deals currently on offer, use our Mortgage Enquiry Form below and get free advice from a specialist mortgage advisor. Alternatively, you can give us a call on .

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