Fool.co.uk, a finance web site, warns that a decrease in house prices may ensure that buyers with 100% mortgages are not able to get onto the housing ladder.
One in 20 first time buyers with this type of mortgage can end up in negative equity, whereby the loan value is higher than the property that has been bought.
In order to sell their property the first time buyer would need to pay back the mortgage lender the difference in value between the property and the loan, more or less mprisoning the first time buyer until their property grew in value to become more than their mortgage .
Borrowers with 100% mortgages ought to be aware that stagnant house prices can keep them chained to their uncompetitive lender, as well prisoners in their property until house prices increase again.
It is better for first time buyers to choose repayment mortgages as opposed to cheaper interest-only options. This ought to enable them to pay their mortgage as often as affordable.
This will ensure a steady reduction of debt .
100% mortgages are meant to offer first time buyers assistance onto the housing market. Yet in a market with falling or stagnant house prices, what providers offer in one hand may be removed by the other when the mortgage deal comes to a close.
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First Time Buyers Prisoners of House Price Fall Mon, 08 Oct 2007
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