A no-deposit mortgage covers 100% of the property's purchase price, meaning you do not have to pay a lump sum upfront. While common before the 2007–2008 financial crisis, they are rare today, though some lenders have re-introduced them.
You will still need separate savings to cover the upfront costs of buying a home (such as legal fees and moving costs).
How It Works & Types Available
Like standard mortgages, you make monthly repayments of the loan amount plus interest, usually starting on a fixed rate before switching to the lender's standard variable rate. Because there is no deposit, lenders take on more risk and usually require one of the following setups:
- Guarantor Mortgages: A family member agrees to step in and make your payments if you default.
- Family-Deposit Mortgages: A relative links their own savings or property equity to your mortgage as security. They risk losing those assets if you fail to pay.
- Track Record Mortgages: A few lenders offer 100% loans without a guarantor if you can prove a history of reliable, on-time rent payments.
The Pros and Cons
Advantages
- Buy Sooner: You can buy a home or move without spending years saving for a deposit.
- Build Equity Faster: Your monthly housing costs go toward owning an asset rather than paying a landlord.
Disadvantages
- Higher Costs: You will face higher interest rates and larger monthly payments because you are borrowing the full value of the home.
- Risk of Negative Equity: If house prices drop, you could quickly owe more than the property is worth, making it difficult or expensive to sell or remortgage.
- Lower Buying Budget: Without a deposit to boost your purchasing power, you are strictly limited to what your income alone can borrow.
- Fewer Choices: Very few lenders offer 100% mortgages, meaning you have fewer deals to choose from compared to a 90% or 95% mortgage.
Borrowing Limits and Credit Rules
- How much you can borrow is determined by strict affordability checks looking at your income, regular spending, and credit history.
- If you have bad credit, getting a 100% mortgage is highly difficult. You will face very limited options and higher interest rates. You may need to look into specialist brokers or focus on improving your credit score first.
Speak to an adviser who will asssess your credit and make the appropriate recommendation.