No Deposit Mortgages

The ability to afford new property is at a low with an economy that is struggling to recover from a global recession.  New statistics are being released at alarming rates that alert us to the declining affordability of home purchases.  Despite the poor statistics; however, there are a number of ways in which people can get the help they need to step up on the property ladder without the requirement of large deposits.  No deposit mortgages, ever popular during the sub prime lending era, is still available today if you know where to look.

A no deposit mortgage has a loan to value ratio of 100% meaning that no cash deposit is required and the entire amount of the property is financed.  The loan to value ratio can actually be higher than 100% if points and closing costs are also included in the financing.  This allows the buyer to purchase a home with absolutely zero down.  For the first time home buyer struggling to save money for a deposit the no deposit mortgage is extremely helpful.

While the no deposit mortgage may seem like the ideal financing option for everyone, there are a few considerations that should be made.  The first consideration is the likelihood that the interest rate will be higher than it would be with a standard deposit of 10%. 

The reason for the increased interest rate is the lender’s view of the mortgage being a higher risk due to the property having no equity when purchased; therefore, recovering the financed amount should you go into default will take longer.  When the property is secured with deposit equity is built in and the chances of recovering the financed amount increase should the lender have to repossess and resell the property.

 Another consideration to make is that the availability of no deposit mortgages is generally reserved for applicants with good credit history and a steady income. 

In today’s economy this may be a difficult task as many people have suffered the loss of jobs, increase in credit card payments and other factors that have adversely affected their credit score. 

Additionally, work situations are more sporadic and people have faced periods of unemployment or underemployment disqualifying them from the no deposit mortgage.

If you are among those who have a good credit history and stable employment background but finds themselves unable to come up with a deposit on a mortgage then you may want to look for a lender who offers no deposit mortgages. 

Not every lender offers such a financing option so you may want to take the time to find a lender who will and one that has the best interest rate for you. 

An online search can provide you with lenders who offer no deposit mortgages over the Internet as well as providing directories of local lenders.  Taking the time to contact these lenders to find out their financing options can save you a lot of time and hassles when you know just what you are looking for.

Other financing options besides the no deposit mortgage are low deposit mortgages that only require between three and five percent and will often offer a lower interest rate than the no deposit mortgages.