100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} Mortgages – What Should You Know?

A 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgage refers to the sum of money that you borrow against your property without a deposit. A zero-deposit mortgage is quite popular among those who are first-time buyers and do not have enough money to make a down payment.

This may sound appealing to you, especially if you are a first-time buyer, but the fact is that they are extremely risky. 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages are not a new concept, but they are very rare. In times gone by, there had been a surge in demand for these loans, but after seeing people struggling with payments, FCA restricted the availability of zero-deposit mortgages.

As you do not have to submit a deposit, it does not mean that a lender will straightaway lend you 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} value of the property you are buying. There are two types of 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages – family deposit mortgages, and family offset mortgages.

What are family deposit mortgages?

A family deposit mortgage is one which requires you to secure against your savings or the property that you already own. Note that the savings of your family member will be worth 10 to 20{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} of the value of the property you are buying. The money will be held in a savings account, and your relative will earn interest on those savings. However, the rate of interest will not be competitive.

This is extremely risky for your relative as they might be strapped later on, which may result in borrowing money for unexpected expenses you come across down the line. The cash will not be held throughout the mortgage repayment term. It will be released to you if either of the conditions are met:

  • The mortgage amount you took out has fallen down to at least 80{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265}.
  • A set number of years have passed, and you have not skipped a mortgage payment.

If you are using a property as security, it does not mean that the full value will be put against the mortgage. Your family will have to let your mortgage lender take charge for about 20 to 25{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} of the property value.

What are family offset mortgages?

Family offset mortgages are the same as family deposit mortgages, with the only difference being that your relative or family member will not earn interest on that amount. The good thing is that you will pay interest only on the amount of the mortgage after deducting the savings amount.

You do not need a guarantor to apply for both types of mortgages. However, before you apply for 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages, it is recommended to consult a free online mortgage broker. They may suggest you better alternatives.

What is the risk in taking on 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages?

Here are the risks associated with 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages:

  • You can be trapped in negative equity if your house value drops. You will struggle at the time of selling your house or applying for a remortgage.
  • As you are borrowing a larger amount of money, you will end up paying hefty interest. It can be difficult to stick to payments.
  • 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages are not widely available, so you will not have too many choices to make to get the best deal.
  • You may not be able to buy an expensive property.
  • Even if you manage to apply for a remortgage, it might not help save money in interest because the loan-to-value can be high.

Is it an option for bad credit people?

Even a standard mortgage can prove to be expensive in case of a poor credit score. It is always suggested that you keep your credit report in good condition so you do not end up with an expensive deal. 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages with bad credit should raise red flags as interest rates will be even higher. Chances are you fall into debt.

If you have a bad credit score and have little or no deposit, seek advice from a mortgage advisor in Edinburgh. They will help you take the right decision.

What are the advantages and disadvantages?

Here are the upsides and downsides of taking out a 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgage:

  • You are eligible to get onto the property ladder without a deposit.
  • Sometimes they could be flexible.
  • You need to rely on your family member.
  • If the property is served as collateral, there is a risk of losing it.
  • They carry very high interest rates.

The bottom line

100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages are very expensive. Other than that, they are very rare. If you get a chance to take out these mortgages, you should ensure that you will stick to payments. Falling behind on payments will ruin your financial situation.

If you are a first-time buyer, you are advised to consult a mortgage advisor. They will evaluate your financial condition and look for better alternatives.

Description: 100{89fd05bafcd69dfc2f839b76d942024acd3b6a2fec1c62c7962b2b1029a55265} mortgages are very expensive. You should try to avoid them if you are not sure about your repaying capacity. Further, these mortgages are not available from all lenders. Read also!

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