100% Mortgage

Sam · Posted: Mon May 31, 2004 3:10 am Post subject: 100% Mortgage

A 100% mortgage is a home loan that is equal to the total sale price or appraised value of the property, whichever is less. In other words, borrowers opting for this kind of mortgage do not require paying any down payment.

For example, suppose Nick wants to purchase a property worth $1, 00,000 but does not want to make a down payment. So he takes a mortgage loan of $1, 00,000 and buys the house. Since the mortgage is equal to total sale price of the property, so it is known as 100% mortgage.

Features:

These mortgages are available to those paying no down payment towards the purchase price of the house.
The interest rates charged on these mortgage loans are generally higher than the loans which are equal to a lower percentage of the sale price or appraised property value. But he can get better rates provided he has a fair credit score.
Borrowers availing these loans are required to pay greater amount of mortgage indemnity guarantee, an insurance policy which protects the lender if the borrower fails to repay the mortgage loan.
These loans require higher interest and so the tax deductions are greater than that of other mortgages. Thus a borrower can avail tax benefits if he opts for these mortgages.
If the price of the property decreases, the borrower will have negative equity, that is, the amount of mortgage debt will be greater than the sale price of the property.

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