Virtually similar to 100% mortgages, 125% mortgages are some of the latest types of mortgage products that are being offered to the ever changing and demanding requirements of borrowers.
125% mortgages in simple terms allow you to borrow up to 125% of the property value. This is apportioned by a 95% secured mortgage against your home and a further 30% on an unsecured basis. The maximum that can be borrowed on an unsecured basis is £30,000.
A 125% mortgage is split into 2 parts where both bear equal levels of interest rates. The interest rate will be determined by the provider of the mortgage.
Who can apply for a 125% mortgage?
125% mortgages are available to both first time buyers and those who are looking to remortgage, or take out another mortgage.
Why should I consider a 125% mortgage?
There could be a number of reasons why the borrower may opt for a 125% mortgage. Some of the reasons identified have been to clear and consolidate debts and better manage finances. Some even require this type of borrowing to fund additional renovations and decorations on the new property. In fact, the additional money that you receive can be used for virtually anything. It would be a good idea to discuss this with your mortgage provider to avoid any discrepancy.
What to watch out for with a 125% mortgage?
Like with any mortgage product it is very important that you are fully aware of what you are getting yourself into. Again, you must realise that you could be actually borrowing more than the value of the property. Mortgage providers who offer this type of product will aim to differentiate the product by offering other features that could be beneficial to you. So you may be wise to do your homework well and shop around.
Generally, with this type of mortgage you should expect to pay higher rates of interest for the simple privilege of being able to borrow more than normal. The interest rates will be higher in comparison to mortgages less than 100% percent of the property value.
Make sure you can keep up with the payments with the plan to be able to overpay should the mortgage product allow. On a final note don’t expect to come out of negative equity immediately and also the housing market may not soar like it has in the past!
Where do I go for a 125% mortgage?
You have a number of options that are available to you including the internet or even the major institutions on the high street or simply by visiting our mortgage providers page
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