The return of the 100% mortgage

Posted on September 6th, 2011 | Categories - News

Aldermore have launched a new mortgage product available up to 100% of the purchase price if a family member is willing to act as guarantor to the borrowing above 75% of the value of the property.

The Family Guarantee Mortgage will be available to both first time buyers and home movers and is thought to be the first 100% mortgage made widely available since the credit crunch.

The mortgage will have an interest rate of 6.48%, which is fixed for three years and a family member must be willing to guarantee the borrowing above 75% loan to value. The mortgage comes with booking fee of £299 and a completion fee of £999.

First time buyers

The Aldermore’s move to offer the 100% mortgage could be good news for first time buyers who are struggling to find the 10% deposit required by most lenders, although the interest rate charged is relatively expensive.

Charles Haresnape, managing director of residential mortgages at Aldermore, said that first time buyers were becoming “disenfranchised” from the housing market.

He added: “We believe this is the single biggest issue facing first-time buyers and it needs to be addressed head on if the UK’s housing market is to have a chance of recovery.”

“Family support in the form of gifted deposits has become commonplace and is widely accepted by most lenders. The Family Guarantee Mortgage gives much greater flexibility, enabling guarantors to retain savings and instead provide a guarantee, requiring no cash deposit” he continued.

Affordability

The mortgage will only be available on a capital repayment basis and applicants will need to be able to prove that they can afford the monthly repayments on the whole sum borrowed. The guarantor will need to be able to prove that they can afford the repayments on the section of the loan above 75%.

Competition

Despite the undoubted innovation of this product by Aldermore there is some competition if a 5% deposit can be found. The Bath Building Society offer a mortgage up to 95% loan to value, with parents guaranteeing the loan above 80%, at a rate of 5.29%, significantly lower than the rate charged by Aldemore.

There are a number of other lenders willing to advance mortgages up to 95% to first time buyers at significantly more competitive interest rates than the Aldermore.

Your home may be repossessed if you do not keep up repayments on your mortgage

There will be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate that it will be £299.