The 100% mortgage is the natural, if only, option for the many first-time buyers who simply may not have the opportunity to accumulate or save sufficient money in order to make any sizeable deposit when considering a mortgage. And, unfortunately, because these prospective borrowers have little resource to any other means of acquiring property, the interest rates will tend to be higher because of associated risks involved for the lender.
Fees attached to arranging these deals may also be quite high. Consideration must also be given to the general situation in the housing market at the time of application: If it appears there may a danger of house prices and values falling dramatically, the householder may be in a situation of negative equity, that is to say owing more money than the house would bring on sale. This means that in the event of not being able to afford or keep up with repayments, the householder may be forced into selling the property for far less than the original purchase price and therefore still be indebted to the lender after the property was sold – a situation which was faced by many thousands of people in the late 1970s when interest rates soared to over 15%.
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