This week, Skipton Building Society made history as the first lender to reintroduce the controversial 100% mortgage for first-time buyers. The mortgage allows those embarking on their first home-buying journey to secure a five-year fixed term at the competitive rate of 5.49%, without the need for a deposit or a guarantor.
This big step forward in the market comes with some caveats however; the amount people can borrow is capped at 4.49 times their income, up to a maximum of £500,000. The other conditions of this mortgage are that buyers must be aged between 21-80 years old and pass a credit check.
For those who have the required documentation and who can provide Skipton Building Society with the necessary financial information and proof of identity, then the 100% mortgage could be an optimal choice.
At this current tipping point in the mortgage market, lenders appear to be competing more fiercely for customers amongst a challenging overall economic backdrop. The reintroduction of the 100% mortgage as a risk-limited choice shows that there are potentially better options available for those who might previously have been shut out of the home-buying journey.
Those taking this route should, however, take a measured approach and make sure that the mortgage that they select is the most suitable one for them. Although the allure of the 100% mortgage is strong, having to meet the financial commitments of a five-year fixed mortgage, whatever cycles the economy is in, can be intimidating for aspiring buyers.
Making sure that you are supported by a trusted conveyancing service, whether you are buying a home through a 100% mortgage or not, is also an essential part of the home-buying journey. Not only do they simplify the cheque-signing process, they are on-hand to provide advice and support throughout the purchase.
Making the first step onto the property ladder is a big decision and requires a lot of thought, dedication and financial planning to make sure people can afford the monthly payments, no matter what happens over the course of their five-year fixed term. Before taking out any mortgage, it is essential to do a full review of your finances and run through the full cost of buying a property – including legal expenses and stamp duty.
Taking out a 100% mortgage for your first home is an exciting prospect, but it is important to give it the serious consideration that it deserves.