All clients are made fully aware of the implications of there borrowings be it at 80%, 95% or 125%.
If you borrow 115% then you are starting in negative equity, and yes if the market crashes they will fall further into that. If there circumstances change then yes its by bye house but thats applicable to any mortgage at any level of lending.
Yes the clients would still owe the lender the further 15%. Technically speaking a 115% mortgage is not entirely secured against the property. 95% will be in the form of a mortgage (secured against the property) and the remaining 20% is effecitively a personal loan (therefore unsecured) given to the clients on the same term and interest rate as the mortgage.
So even though you can borrow 115% of what the properties worth, only 95% will be secured against the property. Interestingly this means you can actually remortgage just the 95% element to a different lender and still have the other 20% with the original lender but it starts to get a bit messy..........
Mortgage Class is now dismissed.............