Are 100% mortgages worth using?

Answer 1

Yes, as long as you intend to stay in the property for a minimum of 1 year therefore giving yourself time to get equity in the house (ie buy the house now for £98k sell it in 12 months for £110k).
But be careful you won't get penalties for selling the house.

Answer 2

Understand the 100% is actually an 80% and 20% loan.
The 80% is your first and the 20% is your second. The second is a higher interest rate, usually 1 1/2 points or higher than the first mortgage.
Depending on where you live and the appreciation factors, you may be better off going with a 100% (as stated above) interest only loan.
The money you save on you total mortgage payments could be used to pay down the principal on the 20% (higher interest loan)
You could eliminate your 20% loan in five to eight years.

If you plan to to stay longer then three years, you could reduce your interest rate by agreeing to a prepayment penalty.

You should seek out a real lender (not a shylock) that has your best interest above his commission.

Answer 3

Yes, from an investment point of view because you have very little capital tied up in the property & you have an asset that will potentially rise in value. BUT the key thing is to buy a bargain, that is a property that is cheap in comparison with other similar properties (judged by the prices that have actually been paid - not what vendours ask for!). If you do not buy a bargain or even worse pay too much and you are not in a fast growing property hot-spot then you may run into financial problems especially if you want to sell again.

Answer 4

Disadvantages, there are fewer companies offering 100% mortgages so the rates tend to be higher. If houses fall then you will be in negative equity straight away. Ensure you can meet monthly payments even if interest rates go up. If you default, the building society will sell your house for whatever price they can achieve and then come to you for the difference. these guys do not take prisoners.

Advantages, great if you have no money for a deposit

Answer 5

Yes, providing you have an investment strategy in place, and are disciplined on how you would move forward.

In order to understand why you'd want to borrow as much as possible for your home purchase, you must first grasp the concept that equity has a zero rate of return. Here's an example:

If Consumer "A" buys a home for $300,000, and puts 20% down, then they have $60,000 in equity. Over the next 5 years, the property appreciates $100,000 in value. Consumer "A" now has $160,000 in equity.

Consumer "B" buys a home for $300,000, and puts no money down. At the end of 5 years, that same home is now worth $400,000. Consumer "B" has $100,000 in equity, which is the same appreciation as Consumer "A", a net $100,000.

As you can see, your down payment has nothing to do with your rate of return. What becomes important is how you choose to manage the $60,000 you didn't use as a down payment. If you use it for frivolous activities, such as buying toys or going to Las Vegas , it would be more prudent for you to use that money as a down payment. Especially since this will enable you to obtain a lower interest rate.

However, if you were to invest the $60,000 in a vehicle that can out-earn the cost of that debt, then this could be a formula for success. This is why some lending professionals suggest putting as little down as you possibly can, maximizing your tax write-off, and investing the rest. This principle has been applied for many years in the life insurance game. The old saying goes, "Buy term and invest the rest." The key component is taking the money you would have used as a down payment and creating an asset accumulation account. This account should earn a significant enough rate of return to enable you to pay your mortgage off entirely and achieve the ultimate goal of being debt-free.

Paying Your Home Down Rapidly. There are very few times over the course of my career that I have seen a client with zero debt and no financial difficulties. Choosing to pay off all of your debt can reduce stress and help you to gain freedom of cash flow for investment opportunities. A 15-year mortgage or a bi-weekly payment strategy provides structure. It can also put you on track to have your mortgage paid off within a set timeframe. Simply put, it contains built-in discipline.

It's important, however, to understand that regardless of how rapidly you pay your home off, you're not getting any greater rate of return on your investment than if you paid it off slowly.

Conclusion. So how does one determine which scenario is best? The choice depends entirely upon the individual. Savvy consumers who are disciplined, and are comfortable taking chances from an investment perspective, would do well with the first scenario. Over the course of time, it's been proven that your rate of return over the long-haul will be far greater than the rate you'd pay for a mortgage in today's rate environment. It's important to seek the advice of a skilled investment advisor to ensure success with this strategy.

The second scenario is best for those who have a difficult time managing their money or who'll sleep easier at night knowing they have a plan in place to pay their loan off more rapidly. Be sure that your budget can handle accelerated payments. When consumers "bite off more than they can chew" with a 15-year mortgage, they frequently end up having to refinance back into a 30-year schedule.

If you find this subject intriguing and would like to know more, I recommend that you read a book titled, Missed Fortune 101, by Douglas Andrew. It's an outstanding read that is very simplistic and goes into far greater detail

Answer 6

This is a great option if you have no money to put down, but still want a property.


There is an article that is very good on this website:

Answer 7

This really depends on your credit and what type of interest rate you qualify for but in most cases absolutely use the banks money and keep your cash flow and invest your money. Like I said each case is different so if you need any help or have any further questions please email me [e-mail]

Answer 8

Yeh if you can get one!! It means you can buy a house without needing any deposit. Your montly payments will be higher, and you will probably be charged a higher rate of interest.
Remember that if the value of your property goes down then you will be in trouble!

Answer 9

yes, they allow you to purchase a hose with no down payment. of course this increases your monthly payment but if it's the only way you can purchase a house then go for it. as long as you go fixed on interest you'll be fine. and if you have extra money put it as down payment.