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High LTV mortgages – are they a good idea?

John Carter

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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Abode Mortgages Limited

14 Bateman Road 

Brightlingsea 

Colchester

Essex

CO7 0SG

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Abode Mortgages is a trading style of Abode Mortgages Limited which is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, and is authorised and regulated by the Financial Conduct Authority.  We are entered on the Financial Services Register under firm reference number 669657. Abode Mortgages Limited is a company registered in England and Wales with company number 9311195. The registered office address is Certax Accounting, 76 Park Street, Horsham, West Sussex, RH12 1BX. Our initial mortgage consultations and quotes are free with no obligation to you. If we act on your instructions to apply for a mortgage, we charge a broker fee for arranging and processing the mortgage for you. The fee will be dependent on your circumstances but will not exceed £995. This fee is only payable when we submit a mortgage application to the lender. Your home may be repossessed if you do not keep up repayments on your mortgage.

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