100% financing of mortgage loans for the first buyer
In most home equity mortgages, you pay a percentage of the home's value up front (the deposit), and then the lender pays the rest (the mortgage). For example, for an 80% mortgage, you would have to put up a 20% deposit.
Your guarantor may deposit money into a savings account with the mortgage lender, typically 10-20% of the price of the home. It will stay there for a set number of years. During this time, the guarantor will not be able to withdraw any of the money.
When you have a 100% mortgage, you are more at risk of entering a negative equity situation. If this happens, it can cause problems if you want to remortgage or move houses. You could end up locked into your lender's standard variable rate and pay more than you would with a more competitive offer.
Yes, there are some mortgage providers that will allow you to have a temporary deposit. It is usually 10% of the value of the home, which must be provided by a guarantor, such as a parent or relative.
With a temporary deposit, money is deposited in a special savings account for a set period of time. It is usually the time that the buyer must take to pay the same amount of the loan that is in the savings account.
100% financing
100% financed mortgage loans are mortgages that finance the entire purchase price of a home, eliminating the need for a down payment. New and repeat homebuyers are eligible for 100% financing through national government-sponsored programs.
After much study, banks and lending institutions have determined that the higher the down payment on a loan, the less chance the borrower will default. Basically, a buyer with more real estate capital has more of a role in the game.
That's why, years ago, the standard down payment amount became 20%. Anything less than that required some form of insurance, such as private mortgage insurance (PMI), so that the lender would get their money back if the borrower defaulted on the loan.
Fortunately, there are programs in which the government provides insurance to the lender, even if the down payment on the loan is zero. These government-backed loans offer a zero down payment alternative to conventional mortgages.
While FHA loans are available to almost anyone who meets the criteria, you need a history of military service to qualify for a VA loan and you must shop in a rural or suburban area for the USDA. Eligibility factors are explained later.
100% mortgage financing from the credit union
100% collateralized mortgages have previously been available on the island to first-time buyers who have third parties (such as parents or relatives) willing to act as guarantors for the borrowed funds. Lenders offering this type of product required guarantors to provide additional collateral for applicants to meet the required criteria. Unfortunately, these types of mortgages are not currently offered by any local providers, but we hope they will be reintroduced in the future.
If you're interested in learning more about alternative mortgage options, talk to us at The Mortgage Shop. Our friendly team of independent specialists can advise you on your eligibility, detail the associated requirements, and find the best options available to you.
How to get a loan for a house
Don't have a deposit to get a mortgage? You can borrow with a 100% loan-to-value mortgage or a no deposit mortgage. This facility is very rare in the market, where most lenders require at least 5% deposit. Very few UK lenders accept no deposit mortgage applications.
Mortgages with a 100% loan-to-value ratio are also called secured mortgages, and are more favorable for first-time buyers. People who want to mortgage after a divorce also find this product useful for their financial interests.
With this system, borrowers can obtain the total amount necessary for the purchase of a home, but without any deposit. However, they have to follow strict prerequisites to apply, and those criteria differ among lenders.
You should reconsider if you can't put down any amount to get a mortgage. Some banks and lenders have mortgage offers below 100%, especially for first-time buyers. This means that you can comfortably buy your new house without the need for a deposit, but you need to have one of these supports:
