If you are considering a 100 percent Mortgage Loan, there are quite a few things to consider. It is important to first consider at all sides of this issue. The banks are beginning to tempt us into buying our dream homes with these very attractive loans. For the first time since the housing crash of 2008, many banks are beginning to offer these home loans at near-market rates to conventional borrowers. These are typically people with good credit, but not an abundance of liquid cash flow. The banks offer no-down-payment deals in an attempt to keep the business of finance moving forward in the face of the ever increasing interest rates. But, borrowers beware! You face significant risks, risks about which the banks may not want to warn you!
Similar to the 97 Percent Mortgage Loans that preceded them, the 100 Percent Mortgage Loans carry a wide variety of significant risks. Because you will have zero equity, you could end up “under water” on your house. This basically means that your house payments could end up costing you more than your house is worth if property values decrease even minimally over the coming years. This is something that no one can predict, not even the so-called “economic experts”. If another economic downturn occurs, this may make it extremely difficult to sell your home. But, if you are not planning on moving for 8 to 10 years, this may not be a risk at all. You just have to have a plan.