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Article on 90% Mortgages – 20th Dec 2010

December 20, 2010

If you’re trying to find and obtain a 90% Mortgage in the present UK Mortgage Market, you ought to first understand what 90% Mortgages are in order that you are able to consider the general advantages versus the general negative aspects.

To start with a definition. The phrase “90% Mortgages” describes any kind of mortgage deal that is available up to a maximum loan to value of 90%. Put simply, the mortgage sum offered by the mortgage company is up to 90% of the overall value (or purchase price) of your property. The additional 10% will be covered by a deposit if you’re purchasing, or by pre-existing “equity” (margin) within the property if you’re remortgaging.

The primary advantage of a 90% Mortgage is the fact that you’re covering a big percentage of the properties valuation with a mortgage – and consequently you don’t have to raise as much deposit. In the situation of a re-mortgage, again you’re able to borrow a higher percentage of the properties valuation which might be an essential requirement in your specific circumstances.

Having said that, the advantages may also represent risks. The smaller deposit you place down against a property, or the greater the loan to value percentage, the more exposed you will be to dropping into “negative equity”.

“Negative Equity” is when the mortgage (debt) secured against your property is greater than the valuation of your property. To put it differently, in the event you wanted to sell your property the selling price will not pay off the mortgage (debt) – and you’d have to make available extra money to release the charge(s) over your property and complete the sale. In the event you are not able to make available the extra funds you will not be able to sell the property – and may effectively be a prisoner in your own home. “Negative Equity” ought to be a specific worry for both potential buyers and mortgage lenders in an uncertain property market, like we’re encountering currently in the United Kingdom.

Due to the fact that higher loan to value mortgages are viewed as a greater financing risk by mortgage companies, the deals provided are much less appealing compared to equivalent deals at lesser loan to values. The interest rates are a rather substantial margin higher currently, and associated fees frequently higher. Consequently, if you’re in a position to raise a bigger deposit, not just are you at reduced danger of “Negative Equity”, but you’ll also be a lot more likely to obtain a far more beneficial deal.

20th Dec 2010

By Richard Best

Your home may be repossessed if you do not keep up repayments on your mortgage.

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