100% Mortgage

[MonkeysUncle]

Hi All
I know they used to years ago but it got phased out. I heard recently that they are coming back. Has anyone heard of any banks/building societys etc doing this?

What are the pro's/con's?

[LondonManc]

I'd imagine the main con is the same as the main pro - the bank are taking all the risk; while it's good if it goes tits up early on, you're paying extra interest rate and probably have to pay some sort of high-borrowing fee as well.

Additional: The problem with the Post Office one is two-fold - first time buyer and 10% is a loan secured against parent's property:
https://www.which.co.uk/news/2018/04...-100-mortgage/

[WTFH]

A couple of things:
1. You're a contractor, you should have some savings building up in a warchest, so you should be able to put some sort of deposit down
2. You're a contractor so not every lender will offer you a mortgage.

Now, once we get past those, the next thing to do is run the numbers.
https://www.moneysavingexpert.com/mortgages/best-buys

For the purposes of this experiment, I've gone for a £300,000 house on a 25 year mortgage.
100% mortgage, best deal will cost £16,610 in the first year @2.75%, £1383 per month
90% = £13,410 @1.64%, £1097 per month
80% = £11,430 @1.44%, £953 per month

...and what does that really mean? Well, if the interest rates stayed the same throughout the life of the mortgage:
100% mortgage total repayable = £414,900
90% = £359,100 (including the deposit) - that's saving you £55,800
80% = £345,900 (including the deposit) - that's saving you £69,000

But if interest rates go up, which given where they are seems extremely likely, then so will your repayments. On the first one, your payment would go up £160 per month for a rate rise of 1%. The same rise on the second one would mean £133 extra while on the third it's £117 extra

[northernladuk]

And there is the issue of having a mortgage for more than the house is worth if the market takes a downturn. May not be an issue for the short term future but (arguably) likely in the longer term.

Hi All
I know they used to years ago but it got phased out. I heard recently that they are coming back. Has anyone heard of any banks/building societys etc doing this?

And as it does carry a number a risks I think I'd have expected you to do a bit more research before going down this path.

That said, just because a bank or building society offers it it's likely not to have tight lending criteria which could put contractors out. The lenders have only just got to grips with the way we work so not so sure they'll be falling over to give us 100% mortgages as well. Might be worth speaking to contractor specialist outfits like Freelancer Financials to see what their experience of both 100% mortgages and the possibility of us getting one.

[MonkeysUncle]

A couple of things:
1. You're a contractor, you should have some savings building up in a warchest, so you should be able to put some sort of deposit down
2. You're a contractor so not every lender will offer you a mortgage.

Now, once we get past those, the next thing to do is run the numbers.
https://www.moneysavingexpert.com/mortgages/best-buys

For the purposes of this experiment, I've gone for a £300,000 house on a 25 year mortgage.
100% mortgage, best deal will cost £16,610 in the first year @2.75%, £1383 per month


90% = £13,410 @1.64%, £1097 per month
80% = £11,430 @1.44%, £953 per month

...and what does that really mean? Well, if the interest rates stayed the same throughout the life of the mortgage:
100% mortgage total repayable = £414,900
90% = £359,100 (including the deposit) - that's saving you £55,800
80% = £345,900 (including the deposit) - that's saving you £69,000

But if interest rates go up, which given where they are seems extremely likely, then so will your repayments. On the first one, your payment would go up £160 per month for a rate rise of 1%. The same rise on the second one would mean £133 extra while on the third it's £117 extra

Thanks for the numbers, appreciate it.

With regards to war chest, due to personal circumstances I had to use majority of the war chest so not enough for a deposit at the moment.

@NLUK, I have been researching and seen the same risks that you have mentioned, I havent come across anyone actually offering it so it was wondering. At this stage haven't chosen any path to go down.
At the moment I rent and would love to own so looking at all available options.

[WTFH]

Thanks for the numbers, appreciate it.

With regards to war chest, due to personal circumstances I had to use majority of the war chest so not enough for a deposit at the moment.
...
At the moment I rent and would love to own so looking at all available options.

OK, then the best available option for you is to keep renting, build up your warchest again and build up a deposit. It will mean saving. It will mean spending less. It will mean being careful with your money.
Buying a house and paying a mortgage are a big step.

[Hobosapien]

Also bear in mind that with property prices looking 'peaky' that any mortgage valuation may be somewhat less than the seller is hoping for, so there will be less flexibility in offsetting any shortfall with a bigger deposit if no deposit is available in the first place, unless the area you are considering has shown recent price falls in asking price that you may be able to convince the seller to entertain.

Let us know how you get on if you decide to go for it. Always helps to get up to date feedback on the state of the contractor specialist marketplace.

[vadhert]

Lets party like its 2007 again

[GreenMirror]

Lets party like its 2007 again

Don't we need a 125% mortgage for that?

Those who bought in 2007 have still done well if they could pay the mortgage. Hold on long enough and you cannot lose.

[MonkeysUncle]

Also bear in mind that with property prices looking 'peaky' that any mortgage valuation may be somewhat less than the seller is hoping for, so there will be less flexibility in offsetting any shortfall with a bigger deposit if no deposit is available in the first place, unless the area you are considering has shown recent price falls in asking price that you may be able to convince the seller to entertain.

Let us know how you get on if you decide to go for it. Always helps to get up to date feedback on the state of the contractor specialist marketplace.

So after looking around a bit I got the following responses:

1 - I cant get a 100% mortgage as a contractor from a contractor specialist mortgage broker (were they look at your day rate/contract rather than SA302). It is not open/available to them
2 - If I do go for a 100% mortgage they will look at SA302 in which case the mortgage I can get is tulip

Workaround (suggested by 2 friends who work at a bank and building society)

If you own more than 20% of a business you are classed as self employed/contractor/director.
Give away 82% of your business to a spouse (or someone you trust). Keep myself on as an employee and then set my salary to whatever I want (e.g. £90K). Run this like for 3 months and then all mortgages are open to me. I dont need to provide SA302, just 3 months payslips and I get can a decent mortgage. It not illegal, just grey.

Not that I am going down this route, but interesting that this was suggested by 2 different people.
At this point its going to be renting for another year to raise up the deposit again.