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31st May 2018
Saving a deposit for your first home can be a long and arduous journey. It can mean cutting back on luxuries you love, nights out, takeaways, weekends away and so on. However, Barclays and the Post Office have re-introducted the idea of the 100% mortgage. With this mortgage, no deposit is required to purchase the house of your dreams.
These mortgages are by no means new. Back in 2007, they were all the rage, with Northern Rock even providing a mortgage which had an additional 20% loan on top of the property value to allow first-time buyers to afford furnishings and other items. However, when the financial crisis struck, and people were left struggling with increased debt and negative equity these mortgages all but disappeared, until recently.
The Post Office has released their ‘Family Link’ mortgage. This mortgage combines a 90% mortgage with a 10% loan, which is secured against your parent’s or a close-relative’s home (so long as they own it outright). The 90% mortgage currently has a fixed five-year rate of 4.98%, and the 10% loan is interest free for those five years. Obviously, no deposit is required for this mortgage and you need to be a first-time buyer to be eligible. The maximum you can borrow is £500,000 and you will need to be able to prove you earn a minimum of £20,000 a year to afford the repayments.
The Barclays ‘Family Springboard’ mortgage works in a similar way. Instead of 10% of the mortgage being held against your guarantor’s property, they provide 10% of the property’s price to be held in a Helpful Starter account, whereby it will gain interest and will be returned after 3 years (so long as the repayments have been made).
There are some caveats that you should know about before taking out this type of mortgage. Firstly, there is a risk of the first-time buyer falling into negative equity if house prices fall, meaning your home is worth less than your debt. Secondly, with your parents or close-relative acting as guarantor’s failure to make the repayments could mean their property is at risk.
If you are considering this type of mortgage it is vital you get professional advice prior to going forward with this option.
For more information read our first-time buyer guide here.
Take a look at our 12-step infographic on how to buy a new home.
Whatever your requirements are, when it comes to finding a suitable mortgage, it’s likely that you will find a range of mortgage rates with varying lending criteria – and that’s where we can help.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Source:
https://www.which.co.uk/news/2018/04/is-this-the-return-of-the-100-mortgage/
http://www.dailymail.co.uk/news/article-5719549/Remember-100-mortgages-crashed-economy-Theyre-back.html
