The Inside Edge
The number of mortgage products featuring higher loan-to-values is starting to creep up. Until now, these products haven’t risen above 95%, but Aldermore bank has just released a 100% mortgage allowing homeowners to borrow 100% of the cost of their property. There is just one slight snag, well a couple actually. Firstly, the interest rate is 6.48% so there is no chance of fixing at the current low Bank of England rate, and secondly borrowers will need to find a relative willing to be a guarantor on any borrowing over 75%.
The Family Guarantee Mortgage offered by Aldermore has been designed to help first-time buyers who are struggling to raise the large deposits now required by most lenders, for their first home. Charles Haresnape, Aldermore’s managing director said ”We believe this is the single biggest issue facing first-time buyers and it needs to be addressed head on if the UK’s housing market is to have a chance of recovery. “Family support in the form of gifted deposits has become commonplace and is widely accepted by most lenders. The Family Guarantee Mortgage gives much greater flexibility, enabling guarantors to retain savings and instead provide a guarantee, requiring no cash deposit.”
Last week we looked into gifted deposits and how they could be a lifeline for first-time buyers. This type of mortgage product is destined to help a lot of people to get their first property and it looks like more lenders will follow suit.
There are some other constraints to this particular product. The maximum loan size is £250,000 and borrowers must be 25 years old or over. There is also a booking fee of £299 and a completion fee of £999 to pay and the rate of interest will be fixed for 3 years.
Haresnape said: “We have carefully considered the needs of the guarantor, resulting in a guarantee that is capped at the originally agreed amount. The guarantee can also be repaid at any time, or released if the loan-to-value (LTV) on the mortgaged property falls to 75% or lower.”