100% Mortgages in the UK: Pros and Cons

100% mortgages are a trending topic of conversation at the moment, with the Building Society Skipton announcing their launch of 100%, no-deposit mortgages, the first in the UK since 2008.

So, what is a 100% mortgage?

A 100% mortgage is a loan that covers the entire cost of a property. This means that you do not need to have a deposit to buy a home. 100% mortgages are not as common as they once were, but they can be a good option for first-time buyers and renters, who are struggling to save for a deposit.

There are a number of pros and cons to 100% mortgages.

Pros:

You can buy a home without having to save for a deposit.
You can get on the property ladder sooner.
You may be able to get a lower monthly mortgage payment than if you had a smaller deposit.

Cons:

You will be borrowing more money, which will mean higher monthly payments.
You will be more exposed to risk if the property market falls.
You may have to pay a higher interest rate on your mortgage.

Here are some additional things to consider when thinking about a 100% mortgages:

Your income: You will need to have a good income to be able to afford the monthly payments on a 100% mortgage.
Your expenses: You will need to make sure that you have enough money left over after your monthly expenses to cover the mortgage payments.
Your credit score: Your credit score will affect the interest rate you are offered on your mortgage.
The property market: The property market can be volatile, so it is important to be aware of the risks involved in buying a home with a 100% mortgage.

If you are considering a 100% mortgage, it is important to weigh the pros and cons carefully. It is also important to make sure that you can afford the monthly payments, even if your income changes.

Skipton 100% Mortgage

With regards to the specific 100% mortgage from Skipton, there are a few other things that you should know.

This mortgage has been released during the current time period when rents are skyrocketing and home prices are rising.

Renters who are having trouble saving for a deposit are the target audience for this mortgage; however, applicants with deposits may still be eligible if they are less than 5%.

For one of these mortgages, you must:

Must have been a renter for at least 12 of the last 18 months in a row, and all rent payments must have been made on time during this time. You will need proof of this.
You must be a first-time home buyer and at least 21 years old to qualify for one of these mortgages (this requirement applies to all applicants).
Household bills like council tax, electricity, and/or gas must have been paid in full for at least 12 of the previous 18 months in a row.
Have no intention of purchasing a new-build flat.

However, there is a condition: You can only borrow an amount equal to, or lower than, the amount of rent you pay each month.

For a more in-depth guide to the requirements and details of the Skipton 100% mortgages please click here!

If you are considering a 100% mortgage, it is important to speak to a mortgage advisor to get independent advice. A mortgage advisor can help you to find the best mortgage for your needs and can also help you to understand the risks involved.

* Figures and information courtesy of The Money Saving Expert

100% Mortgages in the UK: Pros and Cons