100% Mortgages: All You Need to Know
Saving for a solid property deposit is one of the most challenging aspects of homeownership. It takes time and, depending on your finances, may seem impossible. If that’s the case but you’re eager to get on the property ladder, a 100% LTV (loan-to-value) mortgage - also known as a 0 deposit mortgage - could be an option.
While appealing, 100% mortgages are controversial and harder to obtain than other loans. That’s why we recommend working with an expert mortgage broker to guide you through the process and find a suitable product for your situation.
Still, it’s important to understand all aspects of 100% mortgages. This guide covers everything you need to know and answers important questions, including:
What is a 100% mortgage?
A 100% mortgage is a loan which requires no deposit, unlike most LTV mortgages. For example, a 90% LTV mortgage requires a 10% upfront payment, with the lender covering the rest. Whereas, a 0 deposit mortgage covers the full property cost.
This option suits those who can’t afford a deposit but can manage monthly repayments. Loan eligibility is based on income, with most lenders offering up to four times annual earnings. So, if you earn £25,000 a year, you could borrow up to £100,000.
How does a 100% mortgage work?
Since there’s no deposit, and therefore less security, 100% mortgages are high-risk for lenders. As a result, they usually require a guarantor and come with higher interest rates, leading to higher monthly costs.
Securing a 0 deposit mortgage isn’t easy. Few lenders offer them, and only to select borrowers, though your chances improve if you’re an existing customer.
What are the types of 0 deposit mortgages?
A 100% mortgage is generally a guarantor loan, requiring someone with good credit to cover repayments if you can’t. This carries risks for the guarantor, so trust is vital.
There are two ways a guarantor can help secure a 0 deposit mortgage:
Using their home as security: A legal charge is placed on the guarantor’s property, making them responsible for shortfalls. They must have positive equity.
Using their savings as security: A sum (10–20% of the property’s value) is held in a frozen account until the mortgage is repaid or used to cover lender losses if repossession occurs.
Can I get a mortgage with no deposit?
Despite approval for a 100% mortgage seeming unlikely, it is possible. Your first step should be consulting a mortgage broker to assess your options.
As with any mortgage, you’ll need proof of employment history, a year’s worth of bank statements and payslips, and a good credit score. Having no outstanding debts will also improve your chances.
What are the advantages and disadvantages of a 100% mortgage?
The key advantage of a 100% mortgage is that no upfront deposit is required, allowing you to get on the property ladder without the time and stress of saving. In the future, you could sell the property for a profit and move to a more upmarket home.
However, there are notable drawbacks. You’ll face higher interest rates, fewer lender/property options, and your guarantor takes on financial risk. There’s also a greater chance of falling into negative equity, where you owe more than the home’s value. Market fluctuations could leave you stuck with an uncompetitive deal, making remortgaging or moving costly, especially with additional fees.
Can first-time buyers get a 100% mortgage?
Both 100% mortgages and first-time buyers are seen as high risk, making approval unlikely without a guarantor. Even then, securing one is difficult.
With high interest rates, this might not be the best option for first-time buyers. A strong credit rating and proof of affordability are essential. As such, we suggest exploring alternatives while saving for a deposit.
Alternatives to 100% mortgages
If you're a first-time buyer, there are great alternatives. The government's 95% mortgage guarantee scheme (launched in April 2021) has made low deposit mortgages more accessible. The Right to Buy scheme also offers council tenants significant discounts on their homes.
Saving just a 5% deposit for a 95% LTV mortgage can be a smarter option, with many major lenders like Barclays, HSBC, and Lloyds offering these loans.
Here at The Mortgage Genie we have a comprehensive understanding on how to get a mortgage and are dedicated to helping people secure loans of all types. We hope that this post has answered any queries and concerns you may have had surrounding zero deposit mortgages.
Every day we help more and more people in the UK find housing happiness by assisting them in finding the mortgage deal which is right for them and walking them through each and every step of the process.
If you’re in need of a team of expert mortgage brokers then don’t look any further, call us today at 01915809890 if you’ve got any further questions or would like us to get you on your way to owning your dream property! And why not see how much you could borrow up to today by using our mortgage calculator?
FAQs
Are 100% mortgages new?
While 100% mortgages haven’t been widely available since the 2008 financial crisis, they’ve recently seen a resurgence, particularly after the Skipton Building Society introduced a no deposit mortgage without the need for a guarantor in May 2023.
To be eligible for Skipton’s new mortgage, you’ll need to:
Be a first-time buyer
Be over 21
Have at least 12 months of rental history
Have a strong credit history
Can I get a 100% mortgage with bad credit?
Although getting a 100% mortgage with bad credit is possible, it’s unlikely. Your chances are higher with a strong credit score, low debt, and a stable income.
Lenders will assess your ability to meet monthly repayments, so proving your affordability is crucial when applying for approval.
This information is a guide only and should not be relied on as a recommendation or advice that any particular mortgage is suitable for you. All mortgages are subject to the applicant(s) meeting the eligibility criteria of the specific lender. You should make an appointment to receive mortgage advice which will based on your needs and circumstances.