Mortgages

Hi  everyone .
I am asking this mostly out of curiosity since we are not ready to move yet and definally not ready to buy a house....
But I was wondering if it is possible in the UK to qualify for a mortgage that covers 100% of the cost of a house?  I live in LA now and the house prices have doubled if not even tripled in certain areas around here so more companies offer 100% mortgage if your credit is perfect and you have a stable job.
Thank you
Marilena

Yes 100% mortgages are definitely available if you have a decent job and good credit.

We were even offered a 125% mortgage as property values increase here so rapidly. 

Bradford & Bingley just came out with a 130% mortgage.  There was a huge uproar about it as it was the biggest mortgage ever offered and they feared lots of people would get in trouble with it in the long run.

Matt

I can understand the fear.  Wouldn't want to touch one of those unless I were in dire circumstances!

Yes 100% mortgages are definitely available if you have a decent job and good credit.

But I doubt that 100% would be offered to a new arrival in the UK, and such a product is fairly risky as there seems every chance that house prices in the UK will not rise as rapidly, or may even fall, leaving you with a mortgage bigger than your house's value.  Given that, on foreclosure, the bank has to pay legal and realtor's fees, and likely sell at a discount, they need to be pretty confident that either you aren't going to default (difficult to be sure for new immigrants, especially when you could "easily" leave the country if things turn bad), or confident that house prices are going to continue to rise at least steadily, (which is doubtful) to give them a cushion on foreclosure.

Yep, 100% mortgages are available, I also heard about a so-called "interest-only" mortgage, though I'm unable to elaborate on it. Though I've been in the UK since '97 (stayed employed here while working in the US for 3 years), I think it's almost impossible for newcomers to get on the property ladder. Usually, the rule was that mortgage lenders would give you a mortgage up to 3 times your yearly salary, so let's say you have an average income of 20-25k ... there's no way you'd find a property for 75k! It would definitely require 2 incomes and good luck to find a 1 BR house for 140k! Secondly, I find it impossible to save for a mortgage deposit while paying £650/mth for rent ... 

I also heard about a so-called "interest-only" mortgage, though I'm unable to elaborate on it. 

You can get an 'interest only' mortgage if you have some other sort of repayment vehicle to pay off the capital at the end of the mortgage term... something like an endowment, or an ISA, or some other sort of investment.

Say you want to borrow £100,000 on an interest only basis...  your payments to the lender would be relatively low, because you are only paying the interest on £100,000. 
But at the end of the term, say 25 years, you would still owe the lender the original £100,000 that they loaned you.  This is where you would cash in your ISA or endowment, which has to be guaranteed to be worth at least £100,000 so that you can pay off the capital balance you owe the lender.

That's roughly how it works..

My husband & I are actually doing the 'interest only' mortgage thing - with prices being so much higher in the UK - it's the only way we can afford the mortgage payment for now!
We actually applied and were approved for a loan and haven;t moved yet!  So it is possible.  We had to have my husband's company write a letter to HSBC saying we are moving and his salary and such...  They told us they usually approve for 4 times the salary - but we couldn;t have afforded that payment!

Good Luck -
Gretta

My husband & I are actually doing the 'interest only' mortgage thing - with prices being so much higher in the UK - it's the only way we can afford the mortgage payment for now!
We actually applied and were approved for a loan and haven;t moved yet!  So it is possible.  We had to have my husband's company write a letter to HSBC saying we are moving and his salary and such...  They told us they usually approve for 4 times the salary - but we couldn;t have afforded that payment!

Usually, it doesnt really save you money, because at the same time  you are paying interest to the lender,  you are also making monthly contributions to the endowment/life insurance company or the ISA provider. 

We got a Bank of Scotland mortgage for 100% when I had only been here for about a year and working for 6 months. We had to take out an insurance policy to cover it if we lost our jobs, got sick etc. It worked weel for us because it got our foot on the property ladder and we are now in the process of upgrading.