Pros and Cons of a 90% Mortgage 

While the return of buy to let mortgages and the proliferation of renters has hogged the headlines of late, the 90% mortgage has quietly made a return to market. All but impossible to find during the height of the recession and property market slump, a number of lenders have recently increased their 90% mortgage product offerings, giving a subtle indication that first time buyers are once again in favour.

While anyone can apply for a 90% mortgage – from first time buyers to seasoned property magnates – they have historically been popular with those eager to invest savings in bricks and mortar for the first time.  But, what are the pros and cons of 90% LTV mortgages?

The Pros

The biggest and most obvious advantage of a 90% mortgage is the fact that only a 10% deposit is required. Historically, first time buyers struggle to gather a deposit together while also paying rent and dealing with other bills so a 90% mortgage is a great compromise between the bank’s preferred 80% LTV products and what a buyer can realistically afford as a deposit.

A smaller deposit also means more cash is available for other essentials such as new furniture and to pay associated costs such as conveyancing fees.

Fortunately, as 90% mortgage products become ever more popular, there is a wide choice of terms and types for would-be buyers to choose from. This gives those applying for a 90% mortgage a much stronger bargaining position and the flexibility to choose a term, interest rate and type of mortgage that suits rather than be tied to a few set choices as is the case with 95% mortgages.

The cons

Although a 90% mortgage means that only 10% of the value of the property comes from the buyer, this can still represent a sizeable chunk of savings and in some cases, take years to achieve. Particularly in areas like London where house prices book the trend and continue to rise (to an average of 340% more than a comparable property in the north) the simple act of getting a big enough deposit together can be tough.

There is also increasingly an embarrassment of riches in the 90% mortgage category, making it hard for buyers to see the wood for the trees. With dozens of lenders, thousands of combinations and choices of fixed rate, variable, tracker, interest only and repayment to get to grips with, there is a danger of drowning in choice and making the wrong decision in the long term.

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