100% MORTGAGES FOR FIRST TIME BUYERS

Since the credit crunch a few years ago, 100% mortgages for first time buyers are making a comeback. This type of mortgage allows the borrower to purchase a home without a deposit. There are some restrictions that apply to this type of loan. The loan is intended for first-time buyers who would otherwise have no chance of getting into the housing market. The UK housing market is in need of recovery and 100% mortgages are designed to help achieve this turn-around. This type of mortgage is available only to first-time buyers who are over 25. It also requires that a parent or grand-parent guarantees borrowing over 75% of the loan.

The buyer obtains the loan only on a repayment basis and must provide proof that monthly payments can be met. The guarantor must also prove that repayments can easily be made on the sum that is being guaranteed. This type of mortgage is gaining in popularity because it allows young people into the housing market that would otherwise not be able to afford to do so because of high deposit requirements. The loans can only be made out to a maximum of £250,000. This will ensure a reasonable first home to the buyer and not incur too unmanageable of a debt.

The housing market in the UK has been in turmoil in recent years and the only chance of recovery is if more young people are able to afford to buy a first-time home. Due to the financial crisis most lenders are requiring large deposits that many younger buyers simply do not have. Getting into the housing market in this way would seem almost impossible. As it stood only those with generous relatives were able to get enough of a deposit to put down on a house. While 100% mortgages for first time buyers are not ideal it is still better than not being able to afford a home at all.

The interest rate charged for this mortgage is fairly steep at 6.48%. If this rate will change in the future is not completely certain. Many homes in the UK now have a higher mortgage than the value of the home. Getting new buyers into the market will at least help some of these financially strapped homeowners repay most of the mortgage owed. Allowing buyers to obtain a mortgage that provides 100% of the loan is a smart idea to help the stagnant housing market on its way to recovery.

When the housing market makes a recovery it is also likely that houses will regain some of their lost value. This is a good time for first-time buyers to get into the market to see an increase in the value of their homes. First-time buyers who opt to get 100% mortgages must be aware of the potential risks involved. They must realize that this type of mortgage leaves no room for becoming ill and unable to work. Parents and grand-parents must also ensure that they know what they have signed up for. As long as all parties are able to maintain the monthly payments this is a good option for new buyers.