Understanding 90% Mortgages

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.

Using Mortgage Brokers

Buying real estate usually means that you will be spending a lot of cash. That cash is, usually, money borrowed as a home or housing loan, from lending agencies or banks.

For people who are not familiar with the ins and outs of financial loaning, especially for home loans, there are a number of mortgage brokers who are willing to assist you. Mortgage brokers are licensed professionals who offer loan products of various lenders.

They do not lend the actual money to borrowers but instead acts as the middleman between borrower and lender. Mortgage brokers may work individually or in a firm.

A major plus point of using the services of a mortgage broker, is that they have many contacts giving you flexibility of choice. While obtaining a loan, it would be usually you, who would go searching for the best terms, but in this case, the mortgage brokers do all the leg work for you.

They work with the home buyers by analyzing their financial and credit situation and matching them with the perfect lending institution from their contacts. When dealing with your mortgage broker, don't be hesitant to give the terms and rates that you are willing to accept as it makes it easier for them to match you with a lender.

Another advantage of having a mortgage broker to work with is that if you have a question regarding the process or terminology, he is there to help you and answer your questions. Your mortgage broker can explain the process, define terminology, and assist you with understanding the time frames.

There are numerous lenders with varying qualification requirements; therefore, your mortgage broker can usually provide you with several viable options meeting your terms and requirements. You can then analyze the options presented to you and chose the one that best fits your time frame and budget.

It is important to ask around and get references for mortgage brokers. You can also search online for popular mortgage brokerage firms. You will want to feel comfortable with the broker you chose to work with before you make your final decision on who to use.