Mortgage broker, Deal Direct on the pros and cons of 100% loans.

As an independent mortgage broker, Deal Direct handle thousands of mortgage enquiries a year. Many of those enquiries come from people with small deposits who are in search of assistance in the form of a Help to Buy scheme and/or a mortgage with a high LTV. However, without the right assistance, these mortgages can be difficult to secure because of the stringent affordability tests that lenders apply.

Why are the rules so strict?

Before the banking crisis from 2007 - 2009, some lenders were regularly approving 100% mortgages and above, sometimes up to 125% of the property’s value. After the banking collapse, however, the housing market was plunged into chaos and 100% + loans were banned.

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Since then, strict regulations have been introduced to reduce lenders’ risk of exposure, including the requirement for at least a 5% deposit from the applicant. As a result, many would-be borrowers have found it extremely difficult to take their first steps onto the housing ladder, because they simply cannot save enough. Market analysts fear that this trend will lead to another kind of housing crisis and some are arguing for the reintroduction of the 100% mortgage.

The most significant advantage of the 100% mortgage is that no deposit is required at all, however, the ban continues because lenders fear the impact of payment arrears. Even though underwriting standards test an applicant’s ability to withstand a mortgage rate increase, sometimes of up to 6 – 8% on high LTV loans, 100% mortgages remain off the table.

What are your options?

For those with little or no deposit, options are still available. Many lenders offer Help to Buy mortgages and remortgages and others offer other products that allow for your family to assist.

The most important thing is to seek expert advice from independent mortgage broker, Deal Direct. With our expertise, we can assist you to source and secure the right mortgage solution according to your circumstances and deposit level.

For further information or a chat about how we can help, call 0800 048 8828 now.  

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Article published: Thursday, August 17, 2017
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