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100% Mortgages on Way Back
16 December 2008
100% mortgages are on the way back with £400million being pledged by ministers to a scheme to help the less-well-off get on the property ladder.
The result could see 18,000 homes that have been sitting empty after the property market crash finally being occupied.
Before the property crash lenders were prepared to lend buyers 100% loans and more. Since the crash lenders have been demanding deposits averaging 16%.
Under the HomeBuy scheme buyers with household incomes of less than £60,000 can borrow money from the government for a deposit. Those who qualify can be lent up to 15% of the value of the property by the government and 15% by the property developer. For the first five years of the loan, interest is not charged. If the property goes down in value when the owner sells it the 30% loan does not need to be paid back, which provides a cushion against negative equity. If the value of the home goes up, the owner will have to repay the loan but keep the profit.
More than 20 developers have agreed to join the scheme which means a first-time buyer could purchase a property worth £180,000 for £126,000.
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