Many first-time buyers and some home movers have difficulty enough scraping together the costs associated with moving. There's the mortgage fee, the surveys and valuations, the legal fees, the horrendous stamp duty in many cases and the deposit. When the numbers are put through the cruncher buyers can end up short.



What can they save on? Sometimes the answer is to save on the deposit, and try and get a 100% mortgage.

A 100% mortgage enables you to borrow the total value of the property, and put down no deposit. This could just tip the balance in favour of getting the property you want, rather than having to settle for second best.

Most providers offering 100% mortgages will insist on a pristine credit rating and you may be charged a higher interest rate for a 100% mortgage, meaning that you will be paying more each month than you would with a traditional mortgage. You may have to agree to keep the mortgage for a minimum number of years. Products for 100% mortgages are usually available in a wide range such as fixed, tracker and variable rate deals. If the vendor requires a deposit, then it will come from the lender and the solicitor will arrange to draw down the deposit from the lender when they legally require it.

Getting a mortgage from a mortgage broker will help you get on the property ladder for no fees, leaving you to add more into your other costs, and rather than wait to save a deposit.

As well as charging higher interest rates for 100% mortgages, the other risk for a lender is negative equity. There is no deposit so there is no equity within the property ? there is no difference in value between the mortgage loan and the value of the property. If house prices decrease after the property is bought then no equity will exist as a buffer. The consequence of this is that if you need to sell your home the 100% mortgage taken out on the original value of the property would outweigh the property's new value. It is a problem for the lender, and it is a problem for you, because effectively you cannot move without paying off the mortgage ? and with negative equity that is more than the house is worth, so the best you could do would be to move down the property ladder. Negative equity was a major problem in the 1990s and caused a lot of grief and hardship for homeowners and would-be movers.

Many first-time buyers are desperate to get on the property ladder, however, and will do so, almost ?whatever the cost?. They can only see getting on the ladder as becoming harder in the future, so feel they have to act as soon as possible. If house prices go up, then they would be right, and they would build in some equity to their property, even with a 100% mortgage. However, if house prices go down ? as they are widely predicted to do - and also, if mortgage rates go down, then they would be wrong, and would have been best to wait.

Oh, for a crystal ball.


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