100% Mortgages Reappear
Since 2008, the first 100% mortgage has returned to the market. The last financial crisis saw house prices plummet by around 20%, and consumers needed to be drawn back to the banks for loans. This time, Skipton Building Society is trying to help those who are struggling to even get onto the property ladder. Through the building society, this option could be useful for renters struggling to get a deposit together. Other benefits of this mortgage are that no guarantor is required and no deposit is needed. Gone are the days of living with relatives and sofa surfing to try and save up enough for your own place.
However, there are restrictions in place, which means that not everyone will qualify. For starters, it is only available for first time buyers. Not only this, but they need a clean record of payments. One of these is rental payments, which must have been paid in full and on time for the last year. The 100% mortgage is a five year fixed mortgage and it doesn’t require a deposit. While it is aimed specifically at people who can’t (or are struggling to) save for a deposit, it is also available for anyone with a deposit that’s less than 5%. This opens up the criteria slightly to include a lot more customers.
The full qualifying criteria are:
You have to be a first time buyer
You must be 21 or over
You must provide proof of payment for all rental payments for the last 12 consecutive months
You are up to date on all household bills for the last 12 consecutive months, with proof
You cannot have missed any payments in the last 6 months, such as streaming services or gym memberships
You will not be buying a new build apartment
The downside is, you are only able to borrow as much as your rent (or less). In other words, your mortgage payments will not be more than your current rental payments. You can see roughly how much you can borrow using the graph below.
If you pay around £2,000 a month in rent, the maximum mortgage amount you can receive is £325,000. On the other hand, renters paying £500 a month can only receive up to £81,000. The maximum amount you are able to borrow from this 100% mortgage is £600,000. These amounts, however, are dependent on Skipton’s affordability tests, which may reduce the overall amount they will lend you.
It could be that this mortgage offer is the best option for some renters, while it may not be much help for others. Naturally, it will depend on where you’re looking to live and the value of properties in the area. The average amount for a first time buyer’s home is £238,000, which you can borrow with this mortgage if you’re currently paying over £1,300 a month in rental payments.
Before anyone rushes to their nearest Skipton branch to take out this mortgage, it’s only worth doing after receiving sensible financial advice. This may not be the best option for all renters, and it can end up being more expensive than other offers, even with a 5% deposit. What’s worse, if property prices fall during your 100% mortgage term, you could easily fall into negative equity and struggle to remortgage or move home.
With all great financial decisions, you should consult an independent financial adviser first. Mortgage advisers can scour the market for you to find the best deal for your situation, including whether this 100% mortgage would work for you. For some people, saving up even just a 5% deposit could shave thousands off their yearly mortgage repayments.