Define 100% Mortgage:

“A 100% Mortgage is defined as a zero-down mortgage or 100% financing, which refers to a home loan where the borrower can finance the entire purchase price of a property without making a down payment.” 

Explain 100% Mortgage:

Traditionally, mortgage lenders require borrowers to make a down payment, typically ranging from 3% to 20% of the property's purchase price. The down payment serves as a form of collateral for the lender and helps mitigate the risk associated with the mortgage.

However, in the case of a 100% mortgage, the lender assumes a higher level of risk by financing the entire purchase price of the property. These types of mortgages were more common before the 2008 financial crisis but have become less prevalent since then due to tighter lending standards and increased risk aversion.

It's worth noting that in some cases, lenders may offer 100% mortgages through special programs or incentives. For instance, certain government-backed loans, such as those provided by the U.S. Department of Veterans Affairs (VA) or the U.S. Department of Agriculture (USDA), may offer zero-down mortgage options to eligible borrowers.

While a 100% mortgage can allow borrowers to enter the housing market without needing substantial savings for a down payment, it's important to consider the potential drawbacks. Without a down payment, borrowers may face higher interest rates, mortgage insurance requirements, or stricter qualification criteria to compensate for the increased risk assumed by the lender.

Example of 100% Mortgage

Let's consider an example of a 100% mortgage with the following requisites:

1. Property Purchase Price: USD 3,000
2. Borrower's Credit Score: 700
3. Lender's Loan-to-Value (LTV) Limit: 100%
4. Mortgage Interest Rate: 4%
5. Mortgage Term: 30 years

In this example, the borrower intends to purchase a property worth $300,000 without making a down payment. Here's how the 100% mortgage would work:

1. Loan Amount: Since the LTV limit is 100%, the lender would provide a loan equal to the full purchase price of the property, which is $300,000.
   
   
2. Interest Rate and Term: The mortgage carries an interest rate of 4% and has a term of 30 years, which means the borrower will make monthly payments for three decades.
   
   
3. Mortgage Insurance: Since the borrower is not making a down payment, the lender may require the borrower to obtain mortgage insurance. This insurance protects the lender in case of default by the borrower. The specific requirements and costs associated with mortgage insurance can vary depending on the lender and loan program.
   
   
4. Credit Score: The borrower's credit score of 700 is reasonably good, which can help them qualify for the mortgage. Lenders typically consider credit scores when assessing the borrower's creditworthiness and ability to repay the loan.

It's important to note that the terms, interest rates, and requirements for a 100% mortgage can vary depending on the lender, the borrower's financial situation, and the country in which the mortgage is being obtained.