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100 Mortgage Financing

September 28, 2012 at 2:03 PM

After seemingly years of no 100% mortgages being available a couple of lenders have come up with a new style 100% mortgage based on a new spin on the old syle "Guarantor Mortgage".

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This new version is a hybrid between the old guarantor mortgages and an Offset mortgage.  These new 100% loans require that a family member deposits 20% of the value of the property being bought into a savings account that runs alongside the mortgage account of the person taking out the loan.

The parent or grandparent has to be aware that their savings are at risk if the child/grandchild defaults on the mortgage.

The big advantage is that the first time buyer (FTB) gets a mortgage based on the fact that they have placed a 20% deposit down. This of course makes the lenders feel much more relaxed about their lending criteria.

Marsden and Newbury Building Society 

The Marsden and Newbury have a 100% mortgage for those who have a parent who is prepared to offset 20% in savings. The rate I s good at a 2 year discounted rate of 3.49pc and an arrangement fee of just under £600. Although the arrangement fee isn’t cheap it’s made an awful lot better by the fact that it includes a free valuation.

It is important to note that although the borrower is only charged interest on the 80% loan the family member receives no interest on their “savings” in the offset account.

We feel though that with savings interest rates being what they are the FTB could pay them interest and they’d still be better off.

As the parent/grandparent you do have consider the possible long term implications very carefully though. Especially when the FTB is married as in the event of a divorce or separation, the ex-partner will have some rights over the house regardless of how the mortgage was funded. 

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Tags: Offset Mortgages 100 Mortgage Financing 100 Mortgage Guarantor Mortgage
Category: 100 Mortgage

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