100% Remortgages

The recent troubles in the economic climate, not only in the UK but around the globe, have naturally had an impact on what lending options are available. This has necessarily affected the types of remortgage deals that you'll be offered, and 100% remortgages have become one of the things that have basically disappeared.

Proportion

The principle of a 100% remortgage is that you are effectively borrowing the full value of your property. The Loan To Value or LTV for a remortgage is the proportion of the property's value that you're actually borrowing from the lender. In many cases, such as where people have funds from the sale of a previous home, a deposit will be paid towards the purchase of the new home, with the rest coming from the lender.

Funds

For many people however, it can be difficult to get onto the property ladder as first time buyers as you naturally do not have the funds from any previous sale. Historically, you were basically required to save up to be able to pay a deposit towards a mortgage, however in more recent years 100% mortgages were made available for people without these funds available.

Risk

A remortgage is where you pay off your current mortgage with the funds from a new one, leaving you with the borrowing from the new one instead. The same principle therefore applies, with you borrowing a certain percentage of the property's value from the lender.

When the percentage of LTV is high, e.g. above 80%, this is considered an increased risk to the lender. However, during period in which property prices are continually rising, such as what we experienced in this country until recently, the risk is minimised a little by the fact that it can more or less be assumed that the property will increase in value in the future.

If a property does increase in value, this effectively reduces the LTV rate, so this is how lenders justified giving 100% mortgages and remortgages. Under this approach, although you've borrowed the full value of the house, the value will increase such that you then owe only a percentage of it within a period of time.

Justification

In today's world of recession, lenders can no longer justify 100% mortgages and remortgages as there is no guarantee that a property will indeed increase in value. In fact, if a property actually decreases in value and the owner has a 100% LTV, they can end up in negative equity which is not at all ideal.

Now

Although experts are now becoming a little more optimistic about the economic state of the country improving before too long, there is no guarantee that lenders will again offer 100% remortgages.