Hanley Economic Building Society has introduced a novel 100% mortgage option tailored for first-time homebuyers looking to step onto the property ladder without needing a deposit. With the Rent to Own mortgage product, individuals can secure loans of up to £350,000, provided they have a minimum annual income of £25,000. The loan amount is restricted to 133% of the applicant’s current monthly rent, with the average UK rent standing at £1,366 per month. This means potential borrowers could access a mortgage with monthly repayments reaching £1,817. Standard credit assessments will still apply.
The interest rate for this offering is fixed at 5.79% for a duration of five years, making it a slightly pricier option compared to other mortgage products in the market that necessitate a deposit.
Mortgage experts caution that opting for a 100% mortgage may heighten the risk of negative equity if house prices experience a decline. Ranald Mitchell, Director at Charwin Mortgages based in Norwich, emphasized that while this mortgage avenue eliminates the need for a substantial deposit, borrowers should be aware of the potential drawbacks, including the possibility of higher interest rates and the importance of maintaining a pristine payment record.
In a similar move, Skipton Building Society recently unveiled its Track Record Mortgage, slated for 2023, which also eliminates the deposit requirement for renters who can demonstrate a year of timely rent payments and possess a favorable credit history. Applicants must ensure that their monthly mortgage payments do not exceed the average rental expenses for the previous six months.
While various no-deposit mortgage deals exist in the market, some may mandate the presence of a guarantor to support the borrower. In such cases, a guarantor, typically a family member or friend who owns a property, is enlisted on the mortgage agreement and is expected to cover payments in case the borrower defaults.
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