100% mortgages- really so bad?

AlbacoreA said:
Its not about just losing your job. You might get sick or for some other reason need to leave work, maybe to look after someone. Maybe your salary will reduce.
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Surely this is the case regardless as to whether you are paying off a 90% mortgage or 100% mortgage.
 
one other thing re 100% mortgages if you have the 10% saved would anyone feel that it is better to hold onto that 10% to service the loan should something happen such as job loss that would seriously put your home in danger. Given that the power to negotiate a price down is with the buyer you can even try and future proof the price to an extent with the final sale price you agree.
 
Slaphead said:
It's the real world, anyone can hurt their back etc and never be able to work again, what do you do then with a whopping 99% mortgage? The should have been stopped by the ppl in charge.
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I agree with this, but that's why I have a "Critical Illness Insurance" for such an eventuality.

I was one on the many who took a 100% mortgage when I bought, simply because I had been working for 9 months approx and sure as hell didn't have 8% of the house values saved up at the time. I needed to move out of my house, and at the time, the mortgage was not that drastically higher than renting an apartment. So i bit the bullet and purchased. Only issue I have now is the negative equity I'm currently on, but as long as I can maintain payments (which I can...If I'm medically unable then I have the insurance to pay off some (not all) of the mortgage) negative equity doesn't become an issue unless you need to sell. So I'll worry about it when I do!
 
Brendan said:
100% mortgages were also a problem in that the general availability of easy credit pushed up house prices.

Brendan
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Hi Brendan,

I see you previously warned people about property crashes and the significant risk of borrowing to buy assets as far back as 2002. How very prescient of you.

http://www.tribune.ie/archive/article/2002/jun/02/its-in-your-best-interest/

Presumably the significant risks associated with property investment you were alluding to in 2002 only grew from that point on, as both asset prices and borrowing levels grew out of control in tandem?
 
So, does it really make any difference as we approach 2012 whether your mortgage is 100% LTV or 80% LTV?
 
I guess it depends on whether people are responsible for themselves, or the banks are responsible. Many Irish people seem to think they were hoodwinked into buying houses, in which case 100% mortgages would be viewed as a bad thing. Also, none of those countries which have managed their property market best allow 100% mortgages. So I am of the mind that they are a bad idea, as there is no hedge against future downturns.
 
STEINER said:
So, does it really make any difference as we approach 2012 whether your mortgage is 100% LTV or 80% LTV?
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Well as a PTSB customer they charge their variable rate customers whose LTV > 80% 0.5% more in interest. Basically they have two variable rate customers - ones with <80% LTV and another with LTV > 80% - who is charges 0.5% more in interest.

Now there has being an announcement in the press last week that they will reduce down the higher rates to come in line with the lower ones so from Feb 2012 onwards they will only have "one" variable rate for home owners.

But this is one way that 100% mortgage holders could be penalized (depending on their bank).

Also can I ask a question slightly off topic - from reading through this thread it mentions your mortgage should be X times your salary. When that is mentioned are they talking about your single salary or your joint salary if buying with someone??
 
Mpsox said:
Yes, because if it is 80% LTV you're monthly payments are less
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Since this was mentioned, do the monthly payments drop during the term if/when the LTV drops below 80% or is it only done at the very start?
 
ryaner said:
Since this was mentioned, do the monthly payments drop during the term if/when the LTV drops below 80% or is it only done at the very start?
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Assuming no change in interest rates then your mortgage payment shouldn't change over the lifetime of the mortgage. However if you start with an 80% LTV, then obviously your payments will be less then if you'd started at 100%
 
as far as I understand the only "drawback" of having a 100% LTV is a higher monthly repayment as the interest rate for 80% LTV is lower.

I have a 100% LTV tracker mortgage and while many people on trackers have lower rates than myself, I consider my total rate of < 3% good and don't feel penalised at all. I didn't overextend with < 5 X combined salaries.
 

There is a 2nd risk, namely that in a time of declining house prices, were the bank to foreclose on you, you are more likely to be in negative equity with a 100% LTV and potentially, if the house was sold from under you, still have a debt outstanding at the end of it
 

Plus you cannot switch lenders if your LTV is 80% +
 
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