If you are looking to find and obtain a 90% Mortgage in the current UK Mortgage Market, you ought to first understand what 90% Mortgages are in order that you can consider the general benefits versus the general negative aspects.
First of all a definition. The term "90% Mortgages" describes any mortgage deal which is available up to a maximum loan to value of 90%. Put simply, the mortgage loan amount offered by the mortgage company is up to 90% of the total value (or purchase price) of your property. The additional 10% will be covered by a deposit if you're purchasing, or by existing "equity" (margin) within the property if you're remortgaging.
The main benefit of a 90% Mortgage is that you are covering a large proportion of the properties value with a mortgage loan - and therefore you do not need to raise as much deposit. In the case of a remortgage, again you are able to borrow a greater proportion of the properties value which may be an important requirement in your particular circumstances.
Having said that, the advantages may also act as negatives. The less deposit you put down against a property, or the higher the loan to value ratio, the more exposed you are to falling into "negative equity".
"Negative Equity" is where the mortgage secured against your property exceeds the value of the property. In other words, if you wished to sell the property the sale price would not cover the mortgage - and you would need to find additional funds to release the charge(s) over your property and complete the sale. If you are unable to find the additional funds you will not be able to sell your property - and will effectively be a prisoner in your own home. "Negative Equity" should be a particular concern for both buyers and lenders in an uncertain property market, such as we are experiencing now in the United Kingdom.
Because higher loan to value mortgages are considered a higher lending risk by mortgage lenders, the deals offered are far less attractive than equivalent deals at lower loan to values. The interest rates are a fairly significant margin higher at the moment, and associated fees often greater. Therefore, if you are able to raise a larger deposit, not only will you be at less risk of "Negative Equity", but you will also be much more likely to secure a far more favorable deal.
