by Mark Johnston
Can You Buy a Property with no Deposit at the Moment?
Getting a foot on to the property ladder is a tricky business, especially with the demand of high deposits from lenders before they will even consider lending.
In the height of the property boom there was an abundance of deals and lenders that were willing to lend 100 per cent of the value of a property.
But 100 per cent mortgages have been practically non-existent since the credit crunch and mortgage meltdown. This is purely due to the fact that these particular deals were partly to blame for the financial crisis.
One of the biggest risks with 100 per cent mortgages is that they instantly mean borrowers are in negative equity.
Realistically then it is now extremely difficult to borrow 100 per cent of a property’s value.
The Aldermore bank did launch a 100 per cent back in September 2011, it is a family guarantee mortgage which comprises a 75 per cent mortgage combined with up to a 25 per cent secured loan guaranted by the borrowers parents, step parents or even grandparents. Although no money from the guarantor is required up front.
More recently Bath building society launched a 100 per cent loan to value (LTV) mortgage which is a 3 year fixed rate guarantor mortgage with a 5.29 per cent rate.
Borrowers wanting to access this deal must be at least 21 and have a minimum income of £25,000 and have been either employed for 12 months or self employed for 3 years.
The deals also requires third party collateral in the form of a charge on the parental home equivalent to 25 per cent of the house being purchased.
Dick Jenkins, chief executive of Bath building society, states “the 100 per cent parent assisted mortgage scheme is intended to open up home ownership to a wider demographic in a responsible sensible way”.
Borrowers should also not assume that new build properties are going to be out of their price range as many construction companies and property developers can provide accessible ways to get on to the property ladder.
Developers will sometimes offer to lend potential buyers the money they need for a deposit.
So how it works is that the developer may lend say 20 per cent of the property value and ask for this to be repaid in 15 years. Meaning that the potential buyer would only need to apply for an 80 per cent mortgage, which are far easier to come by and far more affordable than a 100 per cent mortgage deal.
All this said recent data has suggested that first time buyers with smaller deposits are making up a bigger share of house purchase loans, meaning that the market continues to be favourable for those looking to buy their first home.
Paul Smee, director general of the Council of Mortgage Lenders (CML), said “more borrowers are taking out higher loan to value mortgages than any other time in the last 4 years”.
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