Can you get a mortgage with no deposit?

With the average single first time buyer taking just over 7 years to save for the costs of buying a home in the East of England, including the 10% deposit generally required to purchase a home in the UK, setting the money aside for a property purchase is one thing that takes time and plenty of patience.

The difficulties of saving to buy are well documented. Yet, with 100% mortgages back on the menu once again, life could get a little easier for individual purchasers and couples looking to buy their first home…

Getting a 100% mortgage in the UK

The 100% mortgage is exactly that. You’ll borrow the full amount when purchasing a property, with no need to put down a deposit.

Traditionally, you would need at least 5% of the value of the property you are purchasing as a deposit, with most encouraging a deposit of even more (ideally between 10 and 20%) to give you access to the best mortgage deals.

Your 100% mortgage options

It’s important to acknowledge that, whilst on paper 100% mortgages seem pretty great, they come with strings attached.

While 100% mortgage options are thin on the ground, they do exist, with Barclays and Halifax just two of the selected high street lenders allowing you to borrow up to 100% of the property value. No deposit mortgages are known by a different name however. We’ll let Forbes explain more about what a guarantor mortgage really means:

“A guarantor mortgage allows a close family member, usually a parent or grandparent, to act as a guarantor on the debt. The guarantor must typically use their savings or their own home as security against the new mortgage. The guarantor takes on some or all of the risk of the new mortgage. The guarantor must also agree to cover all the monthly mortgage repayments if the homeowner is unable to pay for any reason.”

100% mortgages are also referred to as family deposit, family boost, family link, lend a hand or family springboard mortgages.

Why putting down a deposit is always better

You may be able to apply for a zero deposit mortgage but it doesn’t mean you should. We’d always recommend putting down a deposit when purchasing a property to reduce financial risk and lower your overall borrowing costs.

As an upfront investment in your dream property, a healthy house deposit reduces the loan-to-value (LTV) ratio. A lower LTV generally means more favourable mortgage terms, such as reduced interest rates and smaller monthly repayments. With a deposit, lenders view you as less risky, with better financial stability and a greater commitment to the purchase.

A deposit also creates an equity buffer, which makes it less likely that you will fall into negative equity if property values drop.

Opting for a 100% or no deposit mortgage can lead to higher long-term costs and financial vulnerability. These types of home loans typically come with higher interest rates to compensate lenders for the increased risk, and you’ll foot the bill for larger monthly repayments as a result.

Want to find out more about your mortgage options? Whatever house deposit you have to play with, we can provide the support and guidance you need. Find your advisor to get started.