100% mortgages provide enough funds to the borrower to purchase a property without putting down a deposit.

Essentially 100% of the value of the property is mortgaged, leaving no room for equity at the date the mortgage is secured on the property.

The main benefit of 100% mortgages is that the borrower will not be required to put down a deposit. This can allow people with only a small amount of savings, such as first-time buyers, the opportunity to get a foot on the property ladder.

While this feature may be attractive, 100% mortgages have several terms and conditions that Mortgages of lower Loan to Value (LTV) ratios do not. These include:

• A higher interest rate
• A higher loan balance resulting in more interest to pay
• A limited number of lenders
• Stricter lending criteria
• Tie-ins and early repayment charges
• Mortgage Indemnity Guarantees (MIG)

In addition to these extra terms and conditions 100% mortgages also enhance the risk of negative equity. A decline in the value of the property below the balance of the mortgage will result in negative equity.

However 100% Mortgages have become popular in recent years due to rapidly increasing property prices and the inability to save for the deposit necessary for a more traditional mortgage product.