The Benefits of a 125 Percent Mortgage

125 Percent Mortgages

A 125 percent mortgage is a mortgage product that allows the home buyer to borrow 125 percent of the value of a property...

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125% Mortgages are no longer available. Available options similar to this type of discontinued product are ‘Minimum 10% Deposit’ and ‘Shared Equity Mortgages’.

If you would like to inquire about either a minimum 10% or a shared equity mortgage click on the FREE QUOTE button.


What Do 125 Percent Mortgages Offer

A 125 percent mortgage offers different benefits to different types of borrowers. The most popular reason for taking out a 125 percent mortgage is to consolidate debts. This, however, is not the only reason for considering this type of mortgage. Other possibilities include:

First time buyers : in areas like London where property prices are very high, being able to obtain a mortgage to the value of around five times one’s annual salary (compared with the more usual three to three and a half times annual salary for many conventional mortgages) might make the difference between being able to buy a property or not. Furthermore, if the borrower is short of ready cash, then the unsecured portion of the loan could be used towards legal fees, stamp duty and other costs associated with moving house. The borrower has the flexibility to decide how much of the unsecured loan to use at any particular time and will only be charged interest on the amount outstanding.

Recent graduates: 125 percent mortgages have proved very popular with recent university and college leavers attempting to get their foot on to the property ladder. They are able to consolidate their outstanding student loans and other debts using the unsecured part of the loan, thus enabling them to budget accurately when calculating the costs involved in purchasing their first home.

Property renovation: If you want to buy a property and renovate it, most mortgage providers will not lend more than the current market value of the property. With a 125 percent mortgage you can purchase the property using the secured part of the loan and then pay for the renovations using the unsecured part of the loan. If you choose not to sell the property when renovations have been completed, you will then have the option of re-mortgaging your upgraded (and hopefully more valuable) property using a lower cost mortgage, without the need for a mortgage with an unsecured loan element.

Raising additional finance: Because the unsecured loan component can be used for any legal purpose, mortgage holders who need to raise funds for any reason (e.g. school or college fees, obtaining a deposit for a child’s first independent property, debt consolidation, etc.) might wish to consider a 125 percent mortgage. The overall cost of repayments would certainly be lower than for borrowing on a credit card and would probably be lower than for most standalone personal loans.

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Typical Interest Payments

First Time Buyers

2.89%

Purchased Fixed

2.89%

Discounted Rate

2.99%

Buy To Let

2.99%

Commercial

3%

 

 

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