Buying your first home is a big step and a very exciting time in anyone’s life. However, if you are looking for mortgage deals as a first time buyer without any savings or deposit, your dreams can feel very out of reach!
In this article, we’ll let you know that it is possible to buy a house with no deposit, and how you can achieve this.
Can you get a mortgage without a deposit?
If you’re looking to buy your first home but are struggling to save up, you might be interested to know that it can be possible to get a 100 percent mortgage with no deposit.
A no deposit mortgage – also known as a 100% LTV (loan to value) mortgage could be an option that is worth considering in order to help you get on the ladder and make your property ownership dreams a reality.
How to get a mortgage with no deposit
A no deposit mortgage involves the bank or building society lending the entire value of the property being purchased, instead of requiring a deposit of at least 5% which most lenders will ask for upfront. This means that you will not need to spend years saving up, or spending money on rent either, as getting a mortgage without a deposit is a possibility.
However, a large amount of no deposit mortgages disappeared from the market following the financial crisis of 2007-2008. Although some lenders will offer what is known as a guarantor mortgage (where a homeowner family member or friend is also named on your mortgage), these are rarer than they have been in the past.
Here are some more facts about guarantor mortgages:
- Your family member or friend will need to agree to meet any repayments you miss.
- Your guarantor will also need to have a good credit history and a high enough income.
- They may also need to use their own home as security, meaning that in the event that you fall too far behind on your mortgage repayments, your mortgage company could reclaim money from them or even repossess their home.
- Alternatively, they may need to use their savings as security, by putting a lump sum into a savings account that your mortgage provider holds which cannot be withdrawn until a certain percentage of your mortgage has been paid off.
Read more: What To Do If Your Mortgage Offer Expires Before Completion
What else do I need to know?
If you have a good credit score, low levels of debt and a regular income, it’s more likely that you will get approved for a 100% mortgage.
It’s also important to note that your mortgage provider will require evidence that you can afford your monthly repayments as part of the application process. In addition, a 100% mortgage tends to have a much higher interest rate compared to 95% mortgages that require a deposit, for example.
Finally, you should also be aware that your application fee may be higher, you may need to pay a higher lending charge too (also known as a fee for borrowing) and if your house falls in value you may be left in negative equity. This is where the value of your mortgage is larger than the value of the home, which can be a problem if you are looking to sell your property as you would need to cover the gap between the home’s value and the loan yourself.
Our team is here to help you work through your options and figure out the best route for you. So if you have any questions about mortgage deposits, or anything else mortgage related please get in touch or contact us on 0800 1385856 and our advisers will be delighted to help you.
