How to get a 100% Mortgage

Conventional wisdom has it that you can’t get a 100% mortgage in January 2009, but this isn’t a conventional mortgage blog, so I’m here to tell you that you can if the circumstances are right, here’s how …

First, you need a motivated seller

A motivated seller could be someone who HAS to sell soon because they:

• are facing repossession because they have not been paying their mortgage
• are divorcing
• need to dispose of assets in an estate
• need to relocate
• want to clear their mortgage and unsecured debt before property prices fall further
• are losing money every month on a buy to let

The reason that you need a motivated seller is that they have to agree to drop the asking price by 10%, preferably more. If there isn’t enough pressure on them to go with this, casually suggesting that their property will probably be worth 10% less than it is now pretty soon anyway, might help.

The 10% reduction needs to be off the actual current value of the property, not off what they hoped it was worth.

In practice, the purchase price will remain the same, we have another use for the discount that you negotiated that doesn’t involve depressing sale prices further.

Now you need a lender who is happy to accept a vendor deposit – and they do exist

Next you need an agreement in principle from your lender at the full sale price BUT at 90% loan to value (ltv) assuming that you negotiated a 10 % deposit.

If the property values up ok, the deal is on.

A quick example: You find a property that you would like to buy which is being marketed at £160,000. Doing a little homework, you assess its true market value to be £150,000. You negotiate a price reduction to £135,000 then obtain a mortgage of £135,000 on a purchase price of £150,000 with a £15,000 vendor deposit.

Don’t work about the mechanics of how it works, your solicitor will handle that, but trust me, it does work.