125 Percent Mortgages

What is a 125 Percent Mortgage

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

A 125 percent mortgage is made up of two components:
95 percent mortgage, linked to
an unsecured loan of up to 30 percent of the property's value.

125 Percent Mortgages: Background Information
Northern Rock was the first UK financial institution to introduce a 125 percent mortgage and their ‘Together mortgage’ is still the market leader. A few other lenders, for example, the Coventry Building Society and Scottish Widows, have introduced similar products, but they do not provide loans based on such high income multiples as Northern Rock's offering.

Key Characteristics of a 125 Percent Mortgage:
flexibility;
fixed or variable rate option;
available to first time buyers, people moving house and re-mortgagers;
same interest rate for both the secured and unsecured loan elements;
unsecured loan element can be used for any legal purpose.

Interest Rates on 125 Percent Mortgages
The interest rate charged on a 125 mortgage is slightly higher than for conventional mortgages (but lower than for most standalone unsecured loans).