High LTV mortgages – are they a good idea?
Prior to the Spring Budget, there was speculation that the government may introduce a 1% mortgage deposit scheme. That did not come to fruition; however, a leading mortgage lender has recently introduced a new product which offers first-time buyers (FTBs) a ￡5k deposit on homes up to ￡500,000 – effectively a 99% loan to value (LTV) mortgage.
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The upsides
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It is estimated that, last year, the number of FTBs who got their foot on the property ladder fell to 290,000 (1) – the lowest figure since 2013. Deposits are often a barrier to making a first purchase, so this 99% LTV mortgage is potentially a way for FTBs to enter property market that is more affordable, albeit initially. In the long run, the mortgage will likely have a higher interest rate and will take longer to pay off.?
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The drawbacks
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The newly launched product is not applicable for those buying new builds or flats – both popular choices amongst FTBs. Plus, with house prices still unstable, there is a risk of ending up in negative equity, i.e. the property is worth less than the amount still owed on the mortgage.
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If you’re looking to move home this year, talk to us – we can help find the right mortgage for you.
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Your home may be repossessed if you do not keep up repayments on your mortgage.?
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1 Yorkshire Building Society
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