We were looking at shops that have disappeared from the high street for last week's Finance Fridays. For this week we're talking about something that has made a return – 100% mortgages.
This week Barclays has announced the launch of its first 100% mortgage since the financial crash of 2008. This means the purchaser doesn't need to find a deposit to obtain a mortgage. There are a couple of catches to the Barclays deal in that you need to earn at least £50,000 and you require a parent or guardian to put 10% of the house price in a Barclays savings account for three years. In effect it is a type of guarantor mortgage. At the end of the three years if mortgagor keeps up with the repayments the 10% deposit can be taken out with account with interest (currently 2%) added.
With Barclays back in the 100% mortgage market it's sure to tempt other mainstream lenders to follow. If you're wondering if a 100% mortgage is for you let's have a look at some of the pros and cons.
- Easier and quicker to buy a property as you don't have to save up for a deposit.
- Money can be put towards renovations and furnishings.
- Opportunity to get on the property ladder rather than paying rent.
- Danger of negative equity if you need to sell and house prices fall. You may owe more to the mortgage provider than what the house sells for.
- Interest rates are usually higher with high loan-to value (LTV) mortgages.
- May need to persuade a guarantor to obtain mortgage deal.
Have you struggled to save for a house deposit? Would you take out a 100% mortgage?
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