If you’re a First Time Buyer looking to get on the property ladder, you may be thinking ‘can I get a mortgage without a deposit?’ As property prices and rents in the UK remain high and wages are squeezed by the cost of living, saving up for a deposit may seem out of reach. The good news is that 100% mortgages in the UK are back! This means, if you qualify, you can borrow the full amount you need to buy a home with no deposit needed. It’s important you understand the risks and limitations of a 100% mortgage before committing, but once you’re happy you understand the implications, this product could help you get your foot on the property ladder much sooner than you’d otherwise be able to. However, in some parts of the UK, other schemes may be better suited as we’ll discuss later. In this guide, we explain what a 100% mortgage is, how they work, who they’re for, the benefits and risks of a no deposit mortgage, and what other schemes could help you get on the property ladder.
What is a 100% Mortgage?
A 100% mortgage, otherwise known as a 100% loan-to-value mortgage, a 100% LTV mortgage, or a no deposit mortgage, is a mortgage where the lender provides the full amount of money needed to purchase a property without requiring the borrower to provide a deposit.
How Does a No Deposit Mortgage Work and Do I Qualify?
At the time of writing, there is only one no deposit mortgage available in the UK, so in this section, we’ll explain specifically how the Skipton 100% mortgage works.
Skipton’s 100% mortgage is a fixed-rate mortgage for five years. It’s similar to a standard 5-year fixed-rate mortgage, with the difference being that you don’t require a deposit (although people with less than a 5% deposit may still qualify). For a regular mortgage, you’d typically need at least a 10% deposit.
Instead of providing a deposit, you’ll have to provide proof that you have paid rent in full and on time for at least 12 months. You’ll also have to pass the lender’s affordability and credit checks as you would with a regular mortgage.
Let’s dive a little deeper to find out whether you can get a no deposit mortgage. To qualify you must:
- be a First Time Buyer
- be at least 21 years old
- have been renting for at least 12 consecutive months out of the past 18 without any late payments (proof will be required)
- have kept up with household bill payments (e.g., council tax, electricity, and/or gas) for at least 12 consecutive months out of the past 18 (proof will be required)
- have not missed any other payment commitments in the last six months (this will be checked through your credit report)
- NOT be purchasing a new build property
How Much Can I Borrow with a No Deposit Mortgage?
With Skipton’s 100% mortgage, the amount you can borrow is determined by the amount of rent you have been paying. The maximum monthly mortgage payment you’ll be offered will have to be equal to or less than your current rental payment. This is different to a regular mortgage, where the amount you can borrow is usually determined by an affordability assessment based on your income and outgoings (and is usually somewhere around 4.5 times your salary). With rents as high as they are, being able to take out a mortgage that matches your monthly rental payment may be more than enough for most First Time Buyers, but in some areas, it may be slightly restricting, as we’ll discuss in the next section.
Can I Get a No Deposit Mortgage in London or South East England?
If you live close to our offices in Surrey, Hampshire, or Berkshire, this section is quite important to understand. Although a no deposit mortgage can be hugely beneficial in many parts of the UK, in London and South East England, the higher house prices can make it difficult to take advantage of this product. You’ll likely find that your current rent isn’t enough to purchase the kind of property you desire in these areas. However, there are other schemes that could help you get your foot on the property ladder. The Shared Ownership Scheme could allow you to purchase your dream first home with a small deposit. There are also other options such as the 95% Mortgage Guarantee Scheme and the Deposit Unlock Scheme. We’re specialists in these schemes, so if you live in London or South East England and you’re interested in the 100% mortgage, we can confidently explore all your options to see which is most suitable for your goals.
The Benefits and Risks of a No Deposit Mortgage
Taking out a 100% mortgage does come with its own set of benefits and risks, so let’s look into these a bit deeper.
Benefits of a No Deposit Mortgage
- Easier Entry to the Property Market: A no deposit mortgage enables First Time Buyers to enter the property market without having to save for a substantial deposit. This can be particularly helpful for renters who may find it challenging to accumulate a large sum of money for a deposit.
- Preserving Savings: With a no deposit mortgage, borrowers can retain their savings for other purposes, such as home improvements, furnishing, or emergency funds. This can provide financial flexibility and peace of mind.
Risks of a No Deposit Mortgage
- Higher Interest Rates: Lenders offering no deposit mortgages often compensate for the increased risk by charging higher interest rates compared to mortgages with a deposit. This means you may end up paying more in interest over the life of the mortgage.
- Limited Lender Options: Currently there is only one lender offering a no deposit mortgage in the UK. Even if others come to the market, it’s likely the number of lender options will still be more limited compared to a regular mortgage.
- Negative Equity: Without a deposit, you have a higher loan-to-value (LTV) ratio, which means you owe a larger percentage of the property’s value (100%). If property prices decrease, there is a risk of ending up in negative equity, where you owe more on the mortgage than the property is worth. This could make it challenging to sell or remortgage the property until the market recovers.
- Affordability and Repayments: With a no deposit mortgage, the loan amount is higher, resulting in potentially higher monthly repayments than you would have paid had you raised a deposit. It’s important to assess whether you can comfortably afford these repayments, whilst considering your income, expenses, and potential changes in circumstances.
- Limited Flexibility: Having a large mortgage without a deposit can limit your financial flexibility. It may be challenging to access additional funds or switch lenders until you’ve built up more equity in your home, as your options may be restricted due to the high loan-to-value ratio.
No Deposit Mortgage for First Time Buyers
A no deposit mortgage can offer an opportunity for First Time Buyers to enter the property market without having to save for a substantial deposit. The only no deposit mortgage available in the UK at the moment, Skipton’s 100% mortgage, is specifically and exclusively for First Time Buyers. This could be a lifeline to many First Time Buyers who are trapped in the cycle of high monthly rents, however, it’s still important to carefully consider your individual circumstances and the potential drawbacks explained above. Our advisors can have a look at your situation and assess what options are available to you from across the market. If Skipton’s 100% mortgage is right for you, we’ll be able to apply on your behalf and help to ensure the process goes smoothly. Speak to one of our friendly mortgage advisors here.
Can I Get a No Deposit Mortgage with Bad Credit?
If you have bad credit that is based on recent events, it’s unlikely that you’ll qualify for Skipton’s 100% mortgage. This is because Skipton requires that you haven’t missed any credit repayments in the last 6 months. However, if you have bad credit from events more than 6 months ago, as long as they are not property related you may be accepted for a no deposit mortgage. The mortgage landscape is continuously changing, so if you have bed credit of any kind, please speak to our experts to see what options are currently available to you.
Can I Get a No Deposit Mortgage if I’m Self-employed?
Obtaining a no deposit mortgage if you’re self-employed could be slightly more challenging, but as long as you can prove your affordability and you meet all the necessary lending criteria, you should have the same chance of being accepted as an employed person. To prove your self-employed income, you’ll typically need at least two years’ worth of accounts, but our specialist self-employed mortgage advisors can explain everything you need to know during your initial appointment.
Which Lenders Do No Deposit Mortgages in the UK?
As we’ve mentioned above, at the time of writing this guide there is only one lender offering a no deposit mortgage in the UK, and that’s Skipton Building Society. This product isn’t available directly with Skipton though, you’ll have to go through a mortgage broker, and we’re delighted to say that we have access to this ground-breaking mortgage deal.
Is the No Deposit Mortgage a Government Scheme?
The no deposit mortgage is not a government scheme, it’s a mortgage product that’s currently offered by Skipton Building Society in the UK. For information on the government’s 95% Mortgage Guarantee Scheme, Shared Ownership Scheme or Deposit Unlock Scheme, please see our Help To Buy Schemes page. These schemes may be better suited if you live in London or South East England.
The Bottom Line
If you’re a First Time Buyer in the UK and wondering if you can get a mortgage without a deposit, the answer is yes, as long as you qualify and pass affordability and credit checks. Currently, there is only one 100% mortgage in the UK, which is from Skipton Building Society. Skipton’s no deposit mortgage is for First Time Buyers only, allowing them to borrow the full amount needed to purchase a property. This can be particularly beneficial as saving for a deposit can be challenging due to high property prices, rents and living costs. However, it’s important to understand how Skipton’s 100% mortgage works and the risks associated with a no deposit mortgage before committing. To find out everything you need to know about the 100% mortgage and to see whether it’s right for you please book an appointment.
If you live in Surrey, Hampshire or Berkshire, you may find that one of the Help To Buy Schemes is better suited due to the higher house prices in these areas. We’re specialists at these schemes, so we can help you explore all your options to see which is right for your situation.
At Michael Usher Mortgage Services, we’ve been helping our local community for over 30 years! As we’re not affiliated with any particular lender, we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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