A homeowner who opted for the 100 percent mortgage even though she had saved up 10 percent for the deposit, has issued a warning about the deposit-free option.
Becky Stevenson has urged others to consider the risks of a 100 percent mortgage since her deal left her with nothing in the end.
At 21, she was excited to move out of her parent’s home and into her dream home with her partner.
Whilst working full time, she was able to save some cash towards her dream as well as pay £100 a month rent in her parent’s house.
She had saved £10,000 when she found the perfect home in Sheffield for £72,000 in 2003, however, she was surprised when her mortgage advisor told her and her partner that they should pay no deposit and opt for a 100 percent mortgage.
As a first-time buyer, Becky was naive and agreed to the 100 percent deposit without doing her own research.
She is now warning other homeowners about the risks associated with 100 percent mortgages as she thinks “it’s a terrible idea”.
This comes after the news that Skipton Building Society has recently launched their own deposit-free mortgages to help first-time buyers get onto the property ladder.
Renters struggling to save for a deposit can now get a 100 percent mortgage from Skipton Building Society. It’s the first no-deposit deal – that doesn’t require a guarantor’s backing – to launch in the UK since 2008.
Ms Stevenson told The Sun: “We clearly said, ‘We have these savings’ and they were like, ‘Oh did you know…’ kinda selling it as this amazing thing.
“We didn’t know about all the impacts of that – not getting the best rates, high monthly payments.
“They did take advantage of our naivety, which is really sad… it was absolutely terrible.
“That’s what I fear for first-time buyers now. Somehow they might be sold this dream and if it’s the difference between getting on the property ladder than paying rent, then great. I just want people to be aware of what it might mean for them.”
With no deposit, her monthly repayments were extortionate for the value of the property they had.
She and her partner were paying £600 a month because of the interest rate which was a big jump from the £100 they paid at her parent’s house.
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She continued: “It was a significant amount of money per month for the home we had. If we had a deposit, it would have been significantly less. But they said we both had good jobs and could afford it, so it was sold to us that way.
“There was no independent advice. It was just you can afford it and, ‘Look you have this money to use.'”
The pair instead used their deposit money on furniture for the house, as well as a trip to Mexico.
As the years went on, they realised what a mistake they had made. They said they were upsold other products at the estate agency and signed up for their mortgage protection and home insurance.
The documents they signed stated they would be fined if they moved products within three years.
Her now ex-partner was off work sick for two years after being involved in a serious motorbike accident, which saw Becky take control of the finances and have to pay the bills.
They eventually remortgaged to have some work done on the house but by the time they came to sell it eight years later in 2011, they were left with almost nothing to show for it.
Ms Stevenson, who is a business improvement consultant with her own business said: “When we came to sell, we would have been much better off if we had a deal.
“There wasn’t really anything in it. It covered the solicitor fees and then there was nothing left, we didn’t make a profit.”
She continued: “I hope this is a positive thing to get people out of the renting trap, but I wouldn’t want anyone to be taking this on and getting themselves in a worse position.
“Please get really solid, independent advice and really understand what that means for you and your situation because everyone’s financial situation and life is different.
“Also if you are a business owner and struggling to get a mortgage if you want two or three years’ of books, it could be a great thing but definitely compare and contrast against other offers.
“Don’t be afraid to ask questions – it’s a specialist subject and sometimes we’re made to feel like we should know all about it.”
Charlotte Harrison, chief executive of home financing at Skipton, said: “We need to tackle the UK’s housing affordability crisis to enable more people, especially renters who are trapped in renting cycles, to buy their first home.
“People trapped in renting is one of the UK’s biggest housing challenges, having a massive impact on the fabric of our society. With escalating rents and the cost-of-living squeeze further impacting people’s ability to save for a house deposit, it’s making it almost impossible for people get on to the property ladder.”
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