The Skipton Building Society has recently launched a new mortgage product that is exclusively for renters offering a 100% mortgage. This mortgage product is aimed at helping renters get away from sinking money into landlords pockets and into homeownership, but be warned these won’t come without risk.
In this article post, we will discuss what 100% mortgages are, how they will work, and the pros and cons of this new product.
What are 100% Mortgages?
A 100% mortgage is a home loan that allows borrowers to borrow the full purchase price of the property without having to put down a deposit. This type of mortgage was once popular in the UK, but they all but disappeared after the financial crisis in 2008. The Skipton Building Society's new mortgage product is the first 100% mortgage exclusively for renters since then.
How will they work?
There is limited information about it at the moment but from what we know The Skipton's 100% mortgage for renters has been designed to help get renters into home ownership. What we know so far -
The monthly mortgage payment must be equal to or lower than the rent they are used to paying. The mortgage has been designed as a longer-term product, with a five-year fixed-rate deal, and the interest rate is higher than the current average new five-year fixed-rate. The maximum amount that applicants can borrow will also be determined by the maximum monthly mortgage payment they can afford.
What are the pros and cons?
The Skipton's 100% mortgage for renters offers a way for renters to get onto the property ladder without having to save up a deposit. This mortgage product could appeal to those who cannot afford to save up a five-figure deposit and do not have "the bank of mum and dad" to help them.
However, there are concerns about the risks involve, particularly around the risk of negative equity. Even a small fall in house prices could put those who sign up into negative equity, where people are trapped in properties worth less than their mortgages. Additionally, some have compared this new product to the risky loans that contributed to the 2007-08 financial crash.
There is limited information available at the moment about the Skipton's 100% mortgage for renters, and it is important to note that this product won’t be suitable for everyone. As such, it is important for potential borrowers to carefully consider the risks involved and seek professional advice before making a decision.
The Skipton's 100% mortgage for renters offers a new way for renters to get onto the property ladder, but it is important to carefully consider the risks involved before making a decision. As more information becomes available, we will share it with our readers. If you have any questions or would like to learn more, please don't hesitate to get in touch.
Your home may be repossessed if you do not keep up repayments on your mortgage