Want to buy a house but don’t have enough saved for the down payment? It’s possible to find a mortgage that doesn't require one. Learn about no-deposit mortgages in our guide, including their pros and cons and where to find them.
Want to buy a house but don’t have enough saved for the down payment? It’s possible to find a mortgage that doesn't require one. Learn about no-deposit mortgages in our guide, including their pros and cons and where to find them.
A no-deposit mortgage can help you buy a house without a deposit. A deposit is a lump sum that you pay towards the cost of property. For example, if you want to put down a 5% deposit then you need a mortgage that covers 95% of the property price. That’s why no-deposit mortgages are also called 100% mortgages, because they cover the entire cost of the property.
100% mortgages used to be fairly common but they became much rarer after the financial crisis in 2007–2008. Recently some lenders have started offering no-deposit mortgages again, although 90% and 95% mortgages are still more common.
If you’re approved for a 100% mortgage, you’ll need to make monthly payments to repay the amount you borrowed plus interest. Your mortgage interest rate will likely be fixed for a set period, meaning your payments should be the same each month. After your fixed rate ends, you’ll be put on the lender’s standard variable rate which means your payments could go up or down.
The interest rates on no-deposit mortgages are typically more expensive. Also, borrowing a larger amount means larger monthly payments because there’s more to pay back. While you don’t need to put down a deposit with a 100% mortgage, you’ll still need savings to cover the costs of buying a home.
It takes time to save up a deposit for a home. And for some people, there may be other things you need to save for first. A 100% mortgage could help you buy your first home or move up the property ladder sooner. This could mean building home equity with money you would have otherwise spent on rent. Equity is the portion of your home you own — in other words, the property value minus what you owe on your mortgage.
A 100% mortgage isn’t right for everyone. Here are some disadvantages to consider before applying for a mortgage without a deposit.
Negative equity. The value of property can go down as well as up. If this happens while you have a mortgage, you may end up owing more than the property is worth. You may lose money if you need to sell the property while its value is lower.
Higher interest costs. Interest is calculated as a percentage of what you owe, meaning the more you borrow the more expensive the interest payments get.
Less choice. It’s not as common to find mortgages without a deposit. It’s worth considering 90% and 95% mortgages if they’re an option for you, as you may find a better deal.
Lower budget. Without a deposit to put towards the property price, you may need to look at cheaper homes that your mortgage can cover on its own.
Remortgaging. It’s common to switch your mortgage when the fixed rate ends to get a better deal. But there’s no guarantee you’ll get another 100% mortgage or a mortgage with a low deposit.
Not necessarily, but a lot of 100% mortgages are guarantor mortgages. A guarantor is someone close to you (such as a family member) who agrees to make the mortgage payments if you can’t. This may help you get approved as it’s one way for lenders to manage the risk of lending to you. Your lender will need to do credit and affordability checks to approve someone to be a guarantor.
It’s also common for 100% mortgages to be family-deposit mortgages. This is where a relative offers their own savings or property as security. They may lose their money or home if you can’t make the repayments, so make sure you both understand the risks before applying.
Don’t have a guarantor or relative who can help? You may still be able to get a no-deposit mortgage. Some lenders offer “track record” mortgages without a deposit if you have a history of paying rent reliably.
It depends on things like your income, spending and credit history. Mortgage providers must do strict affordability checks to make sure you’re likely to meet the repayments. Get an idea of how much you could borrow with our free mortgage calculator.
It’s possible to get a mortgage with bad credit but you’ll find it more difficult. You’ll have limited choice and may have to pay higher interest rates. It’s worth looking into specialist lenders or brokers who work with people with poor credit. Some providers may care more about things like your income than your credit score for a mortgage. But it doesn’t hurt to try and improve your score.
One option is the UK government’s Help to Buy Schemes. For example, the shared ownership scheme lets you buy 10-75% of your home and pay rent on the rest, meaning you’d need a smaller mortgage with a lower deposit.
Another option is to save up at least a 5% deposit so that you can then apply for a 95% mortgage. The larger the deposit you can put down, the more mortgage deals there are on offer. Most mortgage deals require you to have at least a 5% deposit.
It might be possible to get a 100% mortgage if you’re a first-time buyer. But there is considerably more choice if you can put down a deposit.
First-time buyers may be able to build up a deposit faster with a Lifetime ISA. This type of savings plan is one of the government’s Help to Buy schemes. You need to be 18 or over and under 40 to open one. You save into the ISA and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
One option is to ask a mortgage broker to help you search the market and arrange a no-deposit mortgage with a lender. Using a broker can be convenient — you may save time and benefit from their expertise and connections. But there are downsides. Some brokers charge fees and some get commission meaning they may not have access to the full market.
Want to search for no-deposit mortgages yourself? See offers from trusted lenders all in one place with Experian. Searching mortgages takes less than two minutes and won’t affect your credit score.
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