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Mortgage: Deposit vs. no deposit
You’ve found the house you want and you have worked out that you can realistically afford to meet the monthly repayments. But there is one problem – you don’t have a deposit.
Finding a deposit for a house can be a real problem. While you save like crazy, house costs are rising all the time, meaning that you need to save more and more money for a deposit… and so it goes on.
This is a problem particularly for first time buyers who are finding hard to get their first foot on the property ladder.
However, there are 100% mortgages available, where you don’t need to pay a deposit at all.
As with all good things, there can be downsides. If you are considering a 100% mortgage because you are struggling to raise a deposit, you need to fully understand any pitfalls associated with it.
Firstly, 100% mortgages cost more. This is because the mortgage lender is stumping up all the money needed to buy your house, rather than spreading the risk, with you paying 5 or 10% of the cost.
So, you’ll be paying an increased APR.
Secondly, should house prices fall (and it can happen - the last property slump was in the late 1980’s), you will find yourself in a negative equity situation. This means that if it happens again and, for example, you sold your house tomorrow, you wouldn’t get the mortgage amount back on it. This would mean that you would still have an outstanding mortgage balance – and no property!
100% mortgages can be the solution where you don’t have a deposit, but do go in with your eyes wide open.
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