This month saw the return of the 100% mortgage from Barclays Bank.   So what’s that all about?

The 100% mortgage  means there is no-deposit required when taking out a mortgage to purchase your home. This type of mortgage is only available to First Time Buyers and movers and is called Family Springboard Mortgage.

This is the first time since the financial crisis that no deposit has been required to gain a mortgage. And it allows borrowers to take out a mortgage of up to £500,000 for a property in the UK.

The need of a large mortgage deposit is one of the major barriers holding people back from getting themselves onto the property ladder. This removes of this factor but there are other important factors that customers should be aware of.

So, how does it work? It requires generous family members to provide 10% of the property’s price as security. This 10% goes into a ‘Helpful Start Account’ the same time the mortgage is being applied for. It is then down to the mortgage applicants to pay a fixed rate of 2.99% for 3 years, at which point the mortgage will then change to a LifeTime Tracker mortgage.

Provided all the repayments have been met, your helper will receive the 10% security payment back in full and with interest.

There are two important points that need to be kept in mind when considering this mortgage.

  1. If the buyer can no longer make the mortgage repayment, the helpers 10% security payment will not be returned.
  2. If the property is repossessed the helper may lose money if there is a shortfall between the money owed and the amount the property is sold for.

This type of mortgage has come under criticism from those who see it as an enabler for people up to purchase a property that they won’t be able to afford in the future.  A further criticism is that it separates people who can afford a house (in this case people with parents/guardians who can afford the security payment) and people who cannot afford a house.

Numerous other mortgage providers are expected to be offering this type of mortgage soon, in order to compete.

First Financial Solutions (Wales) are specialists in complex mortgage cases.  If you would like to discuss a 100% mortgage further and whether or not it would be the right fit for you, contact us. We are independent and can access the whole of the market to find the best, and most appropriate deal for you.