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Something not to so common now is 100% mortgages. 100% mortgages are when sometime not too long ago loan to value (LTV) was 100%. About four years ago buyers had the option of taking out a mortgage without a deposit. At the time lenders were not against this idea as property prices were on an incline. From mid-2007 onwards the criteria for mortgages has become more and more demanding on the borrower, and slowly 100% mortgages have been driven out the market.
Before 100% mortgages you would have to save up for a deposit if looking to purchase a property, as this would give lenders some security on the house.
The success of a 100% mortgage lays on the basis that property prices rise, and if the opposite occurs, so falling prices then the borrower is left with negative equity. This term means whens the value of an asset falls below the loan taken out for the asset. To calculate, simply subtract the loan balance from the asset value.
From August 2007 onwards house prices have been on a decline, hence the pressure put onto 100% mortgages. Halifax HPI showed in August 2007 average house prices was £199,600, with it falling to £167,570 in May 2010, and this alone left many people with negative equity, which resulted to repossession of the house.
An alternative to 100% mortgages are 90%. This is something which has been introduced by The Yorkshire Bank. The mortgage is designed to have a 90% LTV, no fees and £500 cash back.
If you are already have an existing 100% mortgage then you should look to seek advice. An option of transferring to an SVR rate would bring the interest rate lower, taking advantage of the current low rates.
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