Can I get a 100% mortgage as a first-time buyer?

The dream of owning a home is alive and well in the UK, especially among first-time buyers. However, one of the biggest hurdles remains the deposit. With rising house prices and the cost of living, saving for a deposit can seem like an insurmountable task. This has led many to ask: “Can I get a 100% mortgage as a first-time buyer?” Let’s explore the options and realities of obtaining a no-deposit mortgage in the UK.

Table of Contents hide

1 Understanding 100% mortgages

2 Are 100% mortgages available today?

3 Alternatives to 100% mortgages

4 The pros and cons of 100% mortgages

5 Summary

6 FAQs

Understanding 100% mortgages

A 100% mortgage, also known as a no-deposit mortgage, means you borrow the entire value of the property without needing to put down any deposit. These mortgages were more common before the financial crisis of 2008, but they have largely disappeared from the market due to the associated risks for both lenders and borrowers.

Are 100% mortgages available today?

In today’s market, traditional 100% mortgages are extremely rare. Most lenders require at least a 5% deposit, and the average deposit for first-time buyers in the UK tends to be around 15-20%. However, there are a few ways first-time buyers can get close to securing a 100% mortgage.

Alternatives to 100% mortgages

Family-assisted mortgages: Family-assisted mortgages are one way to bypass the need for a large deposit. These involve a family member, usually parents or grandparents, offering their savings or property as security. For example, Barclays offers a Family Springboard Mortgage, where a family member deposits 10% of the property’s value into a savings account linked to the mortgage.


Guarantor mortgages: A guarantor mortgage involves a family member or friend agreeing to cover the mortgage repayments if you default. This can enable lenders to offer you a higher loan-to-value (LTV) ratio, sometimes up to 100%. However, this is a significant commitment for the guarantor, as their own assets or savings are at risk.
Learn more: Guarantor mortgages

Shared ownership: Shared ownership schemes allow you to buy a share of a property (usually between 25% and 75%) and pay rent on the remaining share. This reduces the amount you need for a deposit and mortgage, making homeownership more accessible.
Learn more: Shared ownership mortgage

Track record mortgage: A Track Record Mortgage is a unique mortgage product designed to help renters transition to homeownership without the need for a deposit. This type of mortgage evaluates the applicant’s rental payment history and other financial behaviours to determine eligibility rather than relying solely on traditional income assessments. Learn more: What is a track record mortgage?

The pros and cons of 100% mortgages

Pros:

No Deposit Needed: The most obvious benefit is that you don’t need to save for a deposit, making it quicker to get on the property ladder.

Immediate Homeownership: Allows you to become a homeowner sooner rather than later, avoiding the cost and uncertainty of renting.

Cons:

Higher Monthly Repayments: Borrowing 100% of the property’s value means higher monthly repayments compared to those with a deposit.

Negative Equity Risk: If property prices fall, you could end up owing more than your home is worth.

Strict Eligibility Criteria: These types of mortgages often have strict lending criteria and require a strong financial profile or a guarantor.

Summary

While traditional 100% mortgages are largely a thing of the past, there are still pathways for first-time buyers in the UK to purchase a home with little to no deposit. Family-assisted and guarantor mortgages, Help to Buy schemes, and shared ownership are viable options to explore. Each has its pros and cons, so it’s essential to seek independent financial advice to determine the best route for your circumstances.

FAQs

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