No Deposit Mortgages [mortgageinsuranceguide.blogspot.com]
Question by Scot-Rob: What are the disadvantages of a no-deposit mortgage? Many banks offer these: mortgages which need no deposit. Is this a bad thing for a first time buyer? Is it better to save up and get a regular mortgage with deposit? What are the disadvantages of no-deposit mortgages? (apart from owing the bank a bit more). Best answer for What are the disadvantages of a no-deposit mortgage?:
Answer by Terry
You'll typically have to pay mortgage insurance on top of your loan repayment, which is not a good idea. You'll be better off waiting until you can save a 20% deposit.
Answer by WoodsinAZ
Your interest rate will go up with a higher Loan To Value Ratio. It is not much to speak of, but it could be as much as 1%.
Answer by nostalgia80
If you buy a house with no deposit, that means you are getting 100% loan, right? Usually, people don't realize that they are paying a LOT of interest on their mortgage. especially people who are paying "interest only" or people who are paying minimum. if you pay minimum only, your principal adds up with the unpaid interest. My sister did this and she found out that $ 13,000 was added to the principal only after 1 year. If the real estate market is stable and the real estate value goes up, you can refinance your mortgage. If not, basically you are screwed because your minimum payment will increase over the years, and most people can't afford to pay $ 3000-4000 on the $ 500,000 condo.
Answer by mccray_51
Re: Terry's answer: I know of no lenders (wholesale) who charge Mortgage Insurance on an 80/20 purchase loan. Mortgage insurance is implemented when the LTV (loan to value) of the 1st is over 80%. The advantage of this type of loan is that you purchase a home with no money down. The disadvantage is higher loan payment than other financing with money down.
Answer by thrifty23
This could be a bad idea for a few reasons: 1. Your mortgage payment will be much higher.. 2. You will have to pay PMI or a premium on your interest rate. This usually goes away after you finally pay the 20%. 3. With an unstable housing market you run the risk of owing the bank more than the houses market value. You should have the option of cashing out if times get rough. If it was the housing market of a few years ago, this wouldn't be so risky. Back then, you could have built equity equivalent to 20% in a year or two (in some parts of the country) Hope this sheds some light - for more personal finance tips and ideas check out http://www.thrifty-personal-finance.com
Answer by L F
I don't believe there is a disadvantage if you do not have the money for a down payment. The financing offered allows you to purchase a home today instead of some indeterminate date in the future. Yes you may pay a premium on the rate; but many people derive greater satisfaction from owning a home versus going to Vegas on vacation, a luxury car, or eating out at a fine restaurant... If you do have money for a down payment, you would have to consider the advantage of paying for unanticipated repairs on your home with the cash you hold onto instead of using another form of credit with inferior terms to your financing offer. If you do have enough money to consider various financing options, consider yourself lucky. A knowledgeable mortgage person should be able to run the cash flow cost of the many options available to you which should lead you to a decision that your comfortable with. If you want to have some fun, ask your friends what the interest rate is on their mortgage; they probably won't remember! I've met a few people capable of managing their financing using only cash. The rest of us borrow, work, and hope time will eventually erase our debts one way or another.
www.notapennydown.com . Mark Fidgett, a mortgage broker in Vancouver Canada, explains Zero Down mortgages & deposit in vancouver real estate
mortgageinsuranceguide.blogspot.com Down Payment & deposit in Real estate Vancouver mortgage broker Mark Fidgett down payment
Helping with mortgage deposits is no longer the only answer, says Rupert Jones. Mortgages: how parents can help their children on to the property ladder
No deposit mortgages can help people who are unable to come up with lavish down payments on a standard mortgage and use the no deposit mortgage to buy a new home. With these types of mortgages no cash down payment is required from the borrower and the loan will cover 100% of the value of the home. The first time home buyer who cannot manage to save up for a cash down payment will benefit the most from the no deposit mortgages.
Traditionally a down payment of between 10% and 20% of a property's value is expected in standard mortgage package and in today's economic situation this can be an overwhelming requirement. More people can realistically see themselves purchasing a new home if they are not required to come up with a down payment at all.
This seems like a deal that everyone would like to seek; why put down a huge deposit if you don't have to? There are a few drawbacks including: higher interest rates, the need for steady work and clean credit histories and the lack of lenders willing to offer no deposit mortgages.
Due to an increased risk of never getting the full value of the home should the borrower default on a no deposit loan.
Higher interest rates are used and the requirements to qualify for these loans are much stricter making it difficult for some in today's economy.Although there are only a few creditors offering these loans they are out there for those willing to seek them out.
When your doing your research always make sure you are aware of all the costs involved in the mortgage.
Recommend No Deposit Mortgages Topics
