- Uswitch.com>
- Mortgage guides>
- No Deposit Mortgages Guide 2024
Mortgages with no deposit
Zero deposit mortgages are relatively rare, but it's possible to borrow 100% of the property value in some circumstances. We look at no deposit mortgages, how to get one, and what to consider before you do.
What are no-deposit mortgages?
No-deposit mortgages are simply mortgages that don’t require you to supply an upfront cash deposit. They might be referred to as zero deposit mortgages, 100% mortgages or 100% LTV (loan to value) mortgages.
Although fairly hard to come by, it is possible to find no deposit mortgages, although they mostly require another form of security in place of the cash deposit.
How much deposit is usually needed to buy a house?
Most lenders ask for a deposit equal to at least 5% of the cost of the property you plan to buy. This means that for the average UK home (£365,357) you would need a deposit of around £18,300, according to UK mortgage statistics.
Deposit requirements can vary based on your circumstances and the type of property you wish to buy, so it won’t always be possible to find a 95% LTV mortgage.
Can I get a mortgage without a deposit?
Yes it's possible to get 100% mortgages - or no deposit mortgages in some circumstances. Most 100% LTV mortgage require some form of support from a friend or relative, although in May 2023 Skipton Building Society announced the first truly deposit-free mortgage since 2008.
Family assisted and guarantor mortgages
Some lenders still offer more traditional guarantor mortgage, but family assisted mortgages tend to be the favoured form of guarantor product nowadays, as they offer greater flexibility and pose lower risk to the guarantor.
How do guarantor mortgages work?
With a guarantor mortgage, the guarantor’s income is considered alongside your own when affordability is calculated. This can make it easier for those on a low income to qualify for a larger loan, or a deposit-free mortgage.
The loan is secured on their property and the guarantor must agree to pay your mortgage repayments in the event that you are unable. This means that they could lose their home if they are unable to do so.
How do family assisted mortgage work?
Family assisted mortgages can be a great no deposit mortgage for first time buyers and home movers alike. There are various names for this type of mortgage, but usually they allow you to buy a zero deposit home if a family member or friend:
Puts enough money to cover your deposit requirement (usually 10-20% of the property value) into a savings account for a set number of years - which will later be returned to them, assuming you’ve kept up with your repayments
Accepts a charge equal to the value of your deposit requirement on their home for a set number of years - which will be released when your loan has been reduced to a defined LTV
Can I get a zero deposit mortgage with no guarantor?
No, it’s not possible to buy a house with no deposit if you aren’t able to provide some form of alternative security for the loan, such as a guarantor.
If you own other property or high value assets, it’s sometimes possible to use these in lieu of a deposit, although this is more common with commercial transactions.
What are the risks of getting a mortgage with no deposit?
It's always preferable to provide even a small deposit, if you're able to, as there are some additional risks associated with taking out no deposit mortgages:
Negative equity - where you owe more than the property is worth, and usually happens when property prices fall. This is more likely when you don’t pay a deposit, as a deposit provides you with equity from day one of your mortgage. The greater deposit you’re able to provide, the lower your risk of negative equity
Higher interest rates - these tend to be higher, the lower the deposit provided, so you can expect to pay premium interest rates for 100% mortgages
Risk to the guarantor - As you're only able to take out no-deposit mortgages with the help of a guarantor, there is always a risk to their finances, or potentially their home, if they help you out
What can I do if I can't get a no deposit mortgage?
If you’re struggling to save a large deposit, there are still a number of low deposit mortgage options available, or mortgages that are generally more easily affordable, to consider:
Joint mortgage
Taking out a joint mortgage with a partner, relative or friend, is typically easier than doing so on your own. As well as having multiple income sources to save towards a deposit, two incomes will usually result in a larger loan size, so you could buy a more expensive home.
Joint borrower, sole proprietor mortgages (JBSP)
A JBSP mortgage allows you to add as many as four applicants’ incomes to a mortgage alongside your own (joint borrowers) whilst you remain the sole owner of the property (sole proprietor).
You won’t necessarily be able to borrow 100% of the property value, but it could significantly increase your borrowing power.
Home ownership schemes
Although the help to buy scheme has closed to applicant’s across most of the UK, it is still open to those in Wales. There are also a range of alternative home ownership schemes that could help you get onto the property ladder sooner, such as
The first homes scheme
Gifted deposit
If you’re lucky enough to have a family member who can offer a gifted cash deposit, you can avoid the need for zero deposit mortgages altogether.
There are some tax implications to consider when accepting a gifted deposit, so always seek qualified tax advice before you commit to this.
Save for a deposit
It can be difficult to save for a deposit, especially when the cost of living is high and you have other outgoings, such as rent to pay. There are a few ways that you can save for a deposit more quickly, however.
Although your home ownership journey will be delayed whilst you save, there are some definite advantages of having a deposit - such as lower interest rates, higher loan availability, and less risk of negative equity. Even having 5% of the property value will hugely increase your mortgage options.
According to the latest UK mortgage statistics, there were more than 61,000 mortgages approved in the UK in March 2024 - a 54% increase from January 2023.
No deposit Mortgage FAQs
What is negative equity and why is it more likely to happen with 100% mortgages?
Negative equity is where you owe more on your mortgage than your home is currently worth. This is typically caused by a fall in house prices, and can happen whether or not you have a deposit, but when you borrow the full value of your home, it’s easier for this to happen.
For example: you buy a house worth £250,000 using a zero deposit mortgage, a dip in the property market reduces the value to £240,000, but you still owe £250,000, £10,000 more than it’s now worth. A 5% deposit would mean that you only owed £237,500, so would not yet have fallen into negative equity.
Which lenders offer no deposit mortgages?
There are not currently any lenders offering traditional mortgages with no deposit requirement, but there are a number offering guarantor or family assisted products that could allow you to get a mortgage deposit free.
Some banks, such as Barclays, offer family assisted mortgages, but they are mostly available from building societies. To find a guarantor mortgage that suits you, it’s best to speak to a broker.
Can you get a no deposit buy-to-let mortgage?
No, you would typically need at least a 25% deposit in order to purchase a buy-to-let property. There are some specialist lenders that may accept as little as 15%, but this is usually reserved for portfolio landlords.
If you have other assets, many buy-to-let lenders are willing to accept alternative security to a cash deposit, such as equity in another property or business plant.
