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There are a large number of people who cannot arrange enough capital to put down as advance deposit to avail a mortgage loan. A 100% mortgage is an ideal option for these people. As indicated by its name a 100% mortgage does not necessitate any down payment. So it can be availed by people who have insufficient income to offer even a 5% deposit.

100 percent financing comes in several different options. There are 103 percent loans to cover the cost of closing, and 107 percent loans to allow cash back for repairs or furnishings. The more you borrow the better your credit needs to be. Homeowners asking for 107 percent mortgages should have a credit score in the region of 650. Hence, if you are not careful in choosing the right loan option for your financial situation, it is easy to overpay for the financing.

As mentioned before, the main advantage is that you do not have to supply a down payment. The other benefit is that 10% mortgages are available to people with less than perfect credit. There are 100 percent mortgage loans available for every credit rating; you will just pay different amounts for the financing. Additionally, this scheme offers you an opportunity to get onto the property ladder even if you are turned down by other lending sources in the traditional loan market. Also, you have a choice of mortgages to choose from, just as you would in a more conventional mortgage. You can pick from fixed rate, discounted rate, capped or variable. In fact, the only real difference is that you can not take out a buy-to-let mortgage unless you put down a deposit.

With regard to disadvantages, the main problem is that these mortgages come with higher interest rates than traditional mortgages. Because the very nature of option mean that no deposit is required and that you are borrowing against the complete cost of the property, they are viewed as a higher risk type of mortgage. This in turn leads to higher interest rates, which can make it easier to miss a payment or default if you can not afford to pay your mortgage. You also usually have to pay what is known as a mortgage indemnity premium. Hence, if you have excellent credit you are less likely to default on the mortgage payment.

Further, you have to think about how it will affect the equity in your home. Since, you are not paying a deposit; there you cannot claim any initial equity in your home. So if the market suddenly decreases in worth, and house prices fall, you will loss the safety net of extra money in your home to depend on. If you want to sell your home, you could find that the 100% mortgage is higher than your property's value, thus giving you negative equity and a large financial void to take care of.

Additionally, you may find it a bit difficult to get a 100% mortgage with suitable condition. Hence, it is important to shop around the market to get a number of quotes and closely compare the packages and interest rates offered by different lenders. Thee are sub prime loans for homebuyers with no credit history, recent bankruptcy, or foreclosures. A low credit score will not qualify you for prime rates. Still, it is possible to obtain reasonable rates on your mortgage. Where as a majority of traditional mortgage lenders require two consecutive years of employment, sub prime loans only require one year of employment.

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