90% Mortgages

What are they?

A 90% mortgage is a mortgage where 90% of the value of the property to be purchased is borrowed. In other words, the purchaser is loaned 90% of the property value.

90% is a reasonably common level of mortgage borrowing, especially for younger house buyers. By way of example, if a house costs £200,000, a 90% mortgage would be £180,000.

In general, the bigger the deposit that is placed on a property, the better the mortgage terms. Deposits of 10%, or more, facilitate access to lower interest rates. 10% deposits also offer the flexibility of lower monthly loan repayments, or even a shorter mortgage term.

The 20% deposit required for 90% mortgage is large enough to ensure that most lenders will offer their best deals.

The mortgage will also not be subject to any “higher lending charges” (HLCs). These are fees some lenders charge for customers borrowing more than 90% of the value of the property they are buying.

Providers of 90% Mortgages

Most lenders will provide 90% mortgages. These mortgages represent the mainstream level of borrowing and are very easy to obtain.

There is access to a wide variety of types of mortgage, such as:

• Variable rate
• Fixed rate
• Tracker
• Discounted rate

One of the benefits of a 90% mortgage is that it provides a reasonable level of protection from negative equity. Only in rare cases do house prices fall by more than 10% (with the exception of an economic recession). This means that in a worst-case scenario it should be possible to sell off the house and pay back the full mortgage loan.