"The new 99% mortgage scheme has similarities with the existing mortgage guarantee scheme which supports homebuyers with 5% deposits. However, the key difference between the two is the loan-to-value ratio"
- Pete Mugleston - Online Mortgage Advisor
With the rising cost of living causing many to spend more and save less, it is no surprise that the Yorkshire Building Society's 99% mortgage is catching potential homeowners' eyes.
This new scheme has the potential to open the doors for many renters who have been looking to buy their first homes but are struggling to save for a deposit.
To help people better understand this new scheme, mortgage experts at Online Mortgage Advisor have outlined what 99% mortgages are and the type of person who would best benefit from the scheme.
What is a 99% mortgage?
In a bold move to make homeownership more accessible, the Yorkshire Building Society recently introduced a 99% mortgage scheme.
This new initiative is designed to encourage banks to offer mortgages covering 99% of a property's value in hopes of making it easier for people to take their first steps on the property ladder, reducing the size of the required deposit.
Where to get a 99% mortgage
Currently, the only place to get a 99% mortgage is via the Yorkshire Building Society. They are offering 99% mortgages to existing customers who meet specific criteria and new applicants who have previously demonstrated strong financial stability. However, it's likely similar schemes will be rolled out by banks and building societies across the UK in the near future
The difference between a 99% mortgage and a mortgage guarantee scheme
The new 99% mortgage scheme has similarities with the existing mortgage guarantee scheme which supports homebuyers with 5% deposits. However, the key difference between the two is the loan-to-value ratio. The 99% mortgage covers almost the entire value of the home, with only a 1% deposit required whereas the mortgage guarantee scheme can cover up to 95% of the mortgage, requiring a minimum deposit of 5%.
Are the 99% mortgages right for you?
This new scheme is ideal for individuals who have reliable income streams and good credit histories but have found saving for a large deposit challenging. However, prospective homebuyers need to be aware of the risks associated with this scheme.
The biggest drawback is that homeowners will face higher monthly payments compared to a typical mortgage because they are borrowing a larger sum of money. It’s important that buyers who choose to purchase a home with a 99% mortgage can comfortably afford these repayments over a longer term, even if interest rates remain high.
There also is the potential for the house to fall into negative equity. If the property value declines homeowners might owe more on their mortgage than the property's current value. This situation can make it difficult to refinance or sell the property without incurring a loss down the line.
If you are unsure which mortgage scheme is right for you, it is always wise to consult a mortgage expert who can help you find the best deal for your current situation.
