To attract more borrowers and keep the business buzzing, in spite of rising interest rates, lenders have started placing more attractive mortgages on their silver platter. 100% financing is one such enticing mortgage offer. Under 100% financing mortgage, you need not make any immediate down payment. It is targeted towards people facing liquid crunch but who have a good credit ranking.

How does 100% financing operate?

In broader aspects, 100% loans work just like ordinary mortgages. As a borrower, you have a number of different options to choose from, including adjustable rate mortgages and fixed-rate ones. Under 100% financing, the borrower must obtain the first mortgage for 80% of the home cost, and a second mortgage, also called as the piggyback loan, for 20% of the home cost. Together, they allow you to purchase a home with no money down.

It is generally advisable to apply for both the first and the second mortgage from the same lender.

However, before you go in for a 100% financing, it is essential that you are cognizant with both its benefits and drawbacks, some of which are enlisted as follows:

1. The biggest advantage of this kind of mortgage is freedom from down payment. Once you find the best mortgage rate, all you need to do is find a lender to 100% finance it.

2. Instead of throwing away your money on rent, you can invest it more productively, towards buying the property.

3. They do not attract additional closing costs and under some schemes are available even with higher thresholds.

4. It is important to establish your capacity to pay in order to qualify for a 100% financing mortgage. A person having regular and steady flow of income is more likely to qualify for this kind of a mortgage, than a person with irregular income.

5. 100% financing costs more than conventional loans, for the very apparent reason that you are not providing any down payment.

6. 100% financing will expose you to material risks. Since, 100% financing carries no equity, in case of even the slightest fall in property value, you could end up owing more than your house worth. In case of hard times, there is nothing to cushion your fall. Under 100% financing, the borrower must obtain the first mortgage for 80% of the home cost, and a second mortgage, also called as the piggyback loan, for 20% of the home cost. Together, they allow you to purchase a home with no money down.

7. While the interest rate on 100% financing is only slightly higher than ordinary mortgages, they come with significantly greater private mortgage insurance. Therefore, the monthly payments under 100% financing will be quite high and challenging to meet.

8.There are stricter norms and criteria for qualifying for a 100% financing.

As a borrower, you have a number of different options to choose from, including adjustable rate mortgages and fixed-rate ones. Under 100% financing, the borrower must obtain the first mortgage for 80% of the home cost, and a second mortgage, also called as the piggyback loan, for 20% of the home cost. Together, they allow you to purchase a home with no money down.

For more information, you may contact:
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
(416) 987-0008

Check out http://www.amortgages.ca/ for more information on different refinancing options.

Author Bio: Please visit the website Amortgages.ca if you are interested to learn more about 100% financing. The website also provides valuable information about mortgage Maple and mortgage Woodbridge.

Category: Finances
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