One of the challenges for first time buyers is saving up for a deposit for their first home. But there are now a number of mortgage lenders offering 100% loan-to-value products to first time buyers that do not have the funds to lay down a deposit.
Since the risk for banks is higher on a 100% mortgage, they are subject to more stringent lending criteria than other mortgages and some lenders require that a guarantor – usually a parent or grandparent – will agree to cover the repayments in the event that the borrower cannot meet the monthly costs. 100% mortgages are considered to be of a high risk nature and should not be entered into without due consideration.
There is one 100% scheme in particular from a lender where the customer can acquire a helper to input 10% of the purchase price into a savings account. This helper could be a parent, a relative, a friend or a partner. The lender will then hold a charge over this savings account and the helper would receive the savings back after three years with interest, assuming the mortgage account is paid up to date.
It would be ideal for parents who would like to help with a deposit but want the guarantee of their deposit being returned, and it would also be available to first and second time buyers.