The Abolition Of 100% LTV Mortgages And Remortgages Has Been A Good Thing.
Remortgages and mortgages are both types of home loans.
Home loans as the name suggests are clearly loans that have a relationship to a home or house and when talking about mortgages and remortgages the houses in question must be bought property.
If someone wants a mortgage to buy his first property or he is already a homeowner who wants to move to a property in a different area of the country or to buy a bigger or better property or he requires a remortgage to release equity for any number of purposes the property involved must have equity.
For those uncertain about what equity means, all it means in simple lay mans terms is the amount left when the mortgage balance on any particular property is deducted from what the property is worth.
This means that to work out the available equity on a 300,000 property on which there is a mortgage of 180,000 secured, the equity is 120,000.
The Northern Rock Building Society even advanced both mortgages and remortgages at 125% of equity meaning that the home buyer or the remortgage applicant could obtain remortgages and mortgages at 25% more than the property was valued.
That meant that if a property was valued at 100,000 in the days before the credit crunch mortgages and remortgages were available up to 125,000 on that particular property.
The way this 125% plan worked was by adding 25%, yes that is a whole quarter of the value on to a property left what mortgage or remortgage was possibly available..
Now when applying for either a mortgage or remortgage the borrower must have money to put down.
As a homeowners own money is invested in a property it gives him more impetus to make sure that he can really afford the mortgage payment, as he is not living in a house that in reality is owned by the mortgage lender.
It was not a good thing to arrange a 100% or even more than that loan to value mortgage or remortgage as people did not have any real incentive to make any great effort to repay his mortgage as he had none of his own savings invested.
If things went wrong they could simply hand the keys to the lender and walk away without losing a single penny of their own money.
The abolition of these 100% and more than this mortgages and remortgages has not come one moment too soon.
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