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High LTV mortgages – are they a good idea?

Prior to the Spring Budget, there was speculation that the government may introduce a 1% mortgage deposit scheme. That did not come to fruition; however, a leading mortgage lender has recently introduced a new product which offers first-time buyers (FTBs) a £5k deposit on homes up to £500,000 – effectively a 99% loan to value (LTV) mortgage.

The upsides

It is estimated that, last year, the number of FTBs who got their foot on the property ladder fell to 290,000 (1) – the lowest figure since 2013. Deposits are often a barrier to making a first purchase, so this 99% LTV mortgage is potentially a way for FTBs to enter property market that is more affordable, albeit initially. In the long run, the mortgage will likely have a higher interest rate and will take longer to pay off.

The drawbacks

The newly launched product is not applicable for those buying new builds or flats – both popular choices amongst FTBs. Plus, with house prices still unstable, there is a risk of ending up in negative equity, i.e. the property is worth less than the amount still owed on the mortgage.

If you’re looking to move home this year, talk to us – we can help find the right mortgage for you.

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

1 Yorkshire Building Society

3 Legal & General

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