Infinito Real, a Portugal based group of property investors, has seen a growing number of clients searching for mortgage deals that involve putting little or no money down in order to purchase a property.

Although these types of deals have always been difficult to obtain, Stephen Anderson, Managing Director of Infinito Real, confirms that they are still possible to find - for now.

He explains that the premise behind 100 percent financed mortgages is simple, the property is valued at 20 percent or more above the purchase price allowing an 80 percent loan-to-value (LTV) mortgage to be taken out, thereby eliminating any need for the buyer to part with any money at all, other than buying costs.

The reason these deals have been difficult to obtain is not because of the property itself but the actual client purchasing.

Anderson said: “Typically these high LTV mortgages have been constrained to borrowers that have, and can prove, a high income. For example to obtain a €200,000 mortgage on a 100 percent finance deal, you should look to be able to prove around €3,000 NET income per month (between both applicants if jointly purchased), otherwise the banks will more than likely decline the application.

“Currently, if you can meet this criteria then there is still a good chance of being able to still purchase in this manner but only for the time being.”

However, Anderson does warn that banks are becoming more cautious and much more stringent with their criteria for lending due to rising interest rates.

“On high LTV mortgages, the interest rate on offer is significantly higher than that of a 70 percent, or even 75 percent mortgage, and the bank has all the risk. Buyers can walk away without any financial loss and the banks are stuck with the property.

“We have seen this happen in huge numbers in Spain and it has cost the banking institutes heavily. We saw an increase in rates at the start of June and with predicted increases due shortly lending could become even tighter, which is no bad thing as there are still some great deals to be had.

“For the qualifying buyer there are still some fantastic mortgage products available. With rises that lie ahead, the chances of looking in a sub 3 percent mortgage rate will be out of reach by the end of next year.

“Therefore, I would advise anyone who can buy now to do so as this time next year it would be prudent to expect rates of around 5 percent again. Interest rates are fixed for the term of the mortgage, so if you can get a low rate now it will remain so for the lifetime of the loan, the only increases will come from the Euribor which will not be heavily increased for some time to come.

“Currently the best rates available for 80 percent LTV based on valuation - allowing for 100 percent of purchase price - is around 4 percent (3 percent spread + Euribor, currently 0.7 percent), which is almost double what it was at the start of the year.

“Compare that with the rate for a 70 percent or 75 percent LTV mortgage at 2.6 percent (1.9 percent spread + Euribor) and there is a large difference. Also, the options available for the lower LTV percentage are much more cost effective and less troublesome to acquire.”

Finally, Anderson advises that to be assured of getting the property you’re looking for, you should expect to have to find at least 20 percent of the purchasing price, if you have a good financial history demonstrated over the last six months bank statements.

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