With this type of mortgage as the main implies the lender lends the full amount for the purchase of the property. I.e. if the property was £150,000 they would offer you a £150,000 mortgage. While this can seem a very attractive proposition to the first time buyer in that they do not have to save up a deposit there are inevitably some down sides. These can include higher than normal interest rates also known as Higher Lending Charge (HLC). This charge reflects the increased risk to the lender when the loan is a large percentage of the value of the property this is usually when lending is above 90% or greater. The 100% mortgage is not suitable for every client as in a falling property market you could end up owing more than the house you purchased is worth, this is also known as Negative Equity.

You should always seek professional advice before you decide on which type of mortgage is best suited to your particular needs.

The Discounted rate mortgage

With the discounted rate mortgage you do not pay the standard variable rate of the mortgage lender. They usually offer you a discounted rate over a set time period.
This type of mortgage is attractive to first time buyers because this meads that they will be paying less for their mortgage during the discount period which they can then spend on things such as furniture and other essential home items.

With the discount rate mortgage you pay less than that lenders standard variable rate mortgage, but if the standard rate went up your repayments will also go up, but will still be discounted buy the rate you have agreed, for example if the lenders standard variable rate was 6% and you a discount rate of 2% off the standard rate you would be paying 4%.

The discount rate mortgage can provide you with lower payments than the standard variable rate, but payments can go up if interest rates go up, but can also go down if interest rates go down. If you require your payments fixed for a set period of time you may consider the fixed rate mortgage type below.

Mortgages