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100% Mortgage
A 100% mortgage is where the mortgage lender allows you to borrow the full amount that the property costs, so if the purchase price is £200,000 you can borrow £200,000.
With most mortgages, the lender may expect you to put down a deposit from your own savings, which is typically 10% of the purchase price. With a 100% mortgage, the lender agrees to finance the whole of the purchase price, but will often charge a higher rate of interest and may make other conditions. The lender will also have the property valued to ensure that it is worth the price you are intending to pay.
If you are looking for a mortgage and are borrowing for the first time, moving home, or even transferring your mortgage, 100% mortgage funding can be an attractive option.
Points to watch:
* You will probably be charged a higher rate of interest on the mortgage loan, compared with the lender's standard rate.
* You may have to agree to keep the mortgage for a minimum number of years.
* If you wish to repay all or part of the mortgage before the end of the agreed minimum period, penalty charges are likely to apply.
* If property prices should fall, then the amount you owe on the mortgage could be larger than the value of your home, making it difficult for you to sell and move - the so-called "negative equity trap".
* The mortgage lender may insist that you pay for a mortgage indemnity guarantee policy.
For further information about 100% mortgages click here for independent mortgage advice and quotation.
NOTICE: A mortgage is a loan that is secured on your home and you also need to think carefully before securing any other debts against your home. Your home could be taken away by the lender and sold if you do not keep up the repayments on the mortgage or any other debt secured on it - if you are in any doubt, seek independent professional advice. These notes are offered as a general guide only and do not constitute mortgage or legal advice.
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