Mortgage blog: 100% home loans are back

Over the last few years, one of the biggest casualties of the global economic crisis has been the 100% mortgage. The Daily Mail recently reported that, in the last five years, the number of first-time buyer products has reduced from 13,644 to 1,315. It has been almost impossible for first-time buyers to get a new mortgage without a deposit.

Now, however, borrowers are being offered unsecured loans of up to £50,000 over 15 years at 14.9% APR to use as a deposit for their new home. This means that 100% loan-to-value borrowing is now a reality again.

Loans for a home deposit effectively allow 100% lending

Mortgage Introducer reports that lender Promise Solutions has launched this new unsecured loan facility with an unnamed "multinational conglomerate". Couples can borrow up to £100,000 over 15 years and can use the money as a deposit alongside a traditional mortgage and to cover other costs associated with the purchase. The loan can be taken out by just one party if the other party has imperfect credit, subject to affordability criteria.

Steve Walker, managing director at Promise, said: "There has been much comment in the consumer press about home buyers being unable to escape negative equity or get back on the property ladder. This new loan goes a long way towards answering this problem and also will open up many more opportunities for brokers."

Walker calls the loan a "very straightforward" CCA-regulated loan. There are no fees, overpayments are permitted without penalty and there are no early repayment charges. The loan completes via the lender's solicitors, who also handle the purchase legalities.

Walker adds: "During our pre-launch, some brokers were concerned that mortgage lenders would not accept a loan as a valid deposit but we are pleased to say this is not the case and one of the UK's largest lenders is already completing mortgages alongside this loan. This type of loan has been used very successfully in the new-build sector and is now available to the intermediary market.

"We want to make applying as simple and transparent as possible and have therefore provided the prequalification criteria to brokers on our website plus created a simple application pack which can be completed in minutes. Once this is sent to Promise there is little else the broker needs to do other than concentrate on putting the mortgage in place."

Keith Osborne from whathouse.co.uk says: "This loan facility will offer first-time buyers the chance to get onto the property ladder without having to save a deposit. However, if you are considering this solution then you need to be very sure that you can afford both your new mortgage payments and your monthly repayments to the unsecured loan."

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