A 100% mortgage can sometimes be the only way of securing the property you want, when property prices are rising faster than you can save a deposit.

Traditionally 100% mortgage application involves very strict income checks and the applicant needs to obtain a relatively high credit score. Because of the risk to the lender in taking on board a borrower with no deposit, 100% mortgages are usually subject to a substantial "higher lending charge" ( previously known as a mortgage indemnity premium or MIG for short"). However, this is not always the case, and there are at least two lenders in the UK that do not apply a higher lending charge.

100% mortgages are usually taken by first time buyers, couples who have separated or those buyers that have other uses for their hard earned cash.

 

A relatively new type of mortgage has emerged to compete with the 100% mortgage lenders and this is the 125% mortgage. Applicants can borrow enough to buy the house, pay the solicitor, stamp duty, and still have enough to decorate or furnish.

Example: you see a house for £100,000 but have no deposit and need all your spare cash for other commitments. You are going to need a further £1,700 to pay solicitors fees and stamp duty, and you still have to furnish and decorate it. On top of this you have a loan that is working out a bit expensive because of the interest rate applied to it !
One possible solution provided by a high street lender : borrow 95% of the purchase price as a mortgage and another 30% as an unsecured loan, but at the same interest rate that is applied to the mortgage.

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