100% mortgages; The positives and the negatives.
A 100% mortgage or a no deposit mortgage is basically a mortgage that covers the full cost of the house. They are at the moment quite rare and there are only some niche lenders that will consider it. The reason being is it considered a little risky.
Generally 100% mortgages are guarantor mortgages. This means a family member of a friend will guarantee your house. The guarantor would agree to meet any mortgage repayments you are unable to meet. The guarantor will often secure this against their house or against savings they have.
There really is only one advantage of a 100% mortgage and that is your are getting a 100% mortgage. A house with no deposit needed.
The disadvantages of a 100% mortgage.
It is not all rosy, there are some disadvantages that apply to a 100% mortgage. Apart from the guarantor.
Firstly they generally have much higher interest rates on a mortgage with a deposit. But the main issue is falling into negative equity. The housing market is a volatile thing, prices can come up and go down, and there are lots of factors that effect the price of a house. So if you bought a house for £100,000 and the price of that house fell to £90,000. The money that you owed on the mortgage would be more than the house is worth now. You would now be unable to sell it or if you did you would still owe money on the mortgage.
It feels like it is a good deal but generally speaking getting deposit together for a mortgage is usually the safest way forward. Always speak to someone you trust and the advice you need. Getting a mortgage is a big decision and you need to make sure that you get the right one for you.
(Your house maybe repossessed if you cannot keep up repayments on your mortgage)