The Abolition Of 100% LTV Mortgages And Remortgages Has Been A Good Thing.
There are all forms of loans, one group of which is the group known as home loans of which both mortgages and remortgages are members.
Home loans are obviously allied to property and are as such two forms of home loans that are secured on property.
The property must have equity unlike in the past when remortgages and mortgages were available up to 100% of the value of the property.
Equity is the difference between the value of any particular property and the mortgage that is secured on it.
If for example a property whether it is a house or a flat has a value of 230,000 and the mortgage balance is 140,000, the equity on the property would be 90,000.
The Northern Rock Building Society even advanced both mortgages and remortgages at 125% of equity meaning that the home buyer or the remortgage applicant could obtain remortgages and mortgages at 25% more than the property was valued.
There was even the availability of the 125% mortgage and remortgage from the Northern Rock Building Society which in effect meant that mortgages and remortgages were available on properties on which there was no equity whatsoever.
On this plan if a property was worth 2000,000, 50,000 could be added to this allowing mortgages and remortgages to be forwarded.
Now there is no such thing as a 100% remortgage or mortgage, and therefore the would be borrower must have a deposit when mortgaging or remortgaging.
This is very sensible as it gives the borrower the necessity of taking the mortgage or remortgage seriously as he has money of his own invested and the whole borrowings on his property are not simply money belonging to the bank or building society.
This all resulted not only in the lax lending practices of the mortgage lenders but also to the reckless borrowing of the borrowers who having risked none of their own money they did not have the impetus to make certain that they really could afford to buy that big house.
If things went wrong they could simply hand the keys to the lender and walk away without losing a single penny of their own money.
The availability of 100% and even 125% plans that used to be available partly lead to spates of repossessions as people were not compelled to meet repayments.
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