As the name implies, 100% plus loans are useful for borrowers who haven't saved enough deposit to satisfy conventional lending requirements. Some lenders lend up to 100% of the value of the property, and capitialise lenders mortgage insurance (LMI) in addition, while other lenders lend 97% of the property's value and 3% to cover LMI
You don't actually need a deposit in order to take out this loan. If you opt for a 100% loan (as opposed to a 106% for example), gifts and the first homebuyer's grant can be used to cover additional fees and charges in setting up the loan. In other aspects the loan operates as normal, sometimes on relatively basic terms without features such as redraw or offset facilities.
Positives of the 100% Plus Loan
By borrowing the entire value of the property, the only thing you have to save up for in advance is the transaction costs associated with buying property – legal fees, stamp duties and loan establishment fees. Furthermore if you borrow above 100%, that covers all of those associated costs in taking out a home loan.
- Suitable for those who have to sufficient capacity to repay their mortgage, but haven't as yet been able to set aside funds for a deposit, can benefit from 100% loans.
- 100% loans also target borrowers who have proved they can pay off a debt but can't necessarily save.
- 100% and 100% plus loans get you out of the “rental market” and into your first home a lot sooner than being forced to save for a deposit and pay rent at the same time.
