Want to get on the property ladder but do not have a deposit…
Getting a mortgage with no deposit can be a daunting task, but it is not impossible. If you’re struggling to save for a deposit to buy your first home, you may be able to get on the property ladder with a 100% mortgage – also known as a no deposit mortgage. To get a no deposit loan, you’ll need to meet certain requirements and demonstrate that you are financially stable enough to make regular repayments.
What is a No Deposit Mortgage?
A no deposit mortgage, also known as a 100% LTV (loan-to-value) mortgage, is a type of mortgage where the borrower does not need to provide a lump sum of money as a deposit. Instead, the lender provides the full amount of the loan up front to buy a house. These types of mortgages are rare and are generally more difficult to obtain than traditional mortgages, as they come with higher risk to the lender.
Most lenders will ask for at least a 5% deposit to put towards the cost of buying a property, but with a 100% mortgage you borrow the full property value and do not need to pay any money upfront. So, how can I get a mortgage with no deposit? Here are some steps you can take to increase your chances of getting a no deposit mortgage:
- Check your credit score: Lenders will assess your credit score when determining your eligibility for a mortgage. A good credit score can help you secure a no deposit mortgage.
- Save for closing costs: Although you may not have to put down a deposit, you will still need to pay for other costs associated with the mortgage, such as legal fees, stamp duty, and valuation fees.
- Speak to a mortgage broker: A mortgage broker can help you find lenders who offer no deposit mortgages and can guide you through the application process.
- Consider government schemes: The government offers schemes to help first-time buyers get on the property ladder, These schemes can help you secure a mortgage with a smaller deposit.
With the right preparation and research, you can secure a mortgage with no deposit, allowing you to buy a home without having to save for months or even years. At Greenacre we can advise you of the steps required to secure an LTV mortgage and the risks associated with this type of loan. And we’ll also provide some tips on how to get the best deal possible.
Read our blog on How do you apply for a mortgage in unique circumstances, which includes advice for these with complex financial and personal circumstances.
How to Find a Lender Who Offers No Deposit Mortgages
The best way to find a lender who offers no deposit mortgages is to use a whole of market independent mortgage broker such as Greenacre Financial Services.
We can discuss the requirements that each lender has in order to qualify for a no deposit mortgage.
We have helped many people by arranging 100% mortgages and recommend the right lender who suits your borrowing needs. We are a Whole of Market independent mortgage broker, offering a choice of around 100 lenders and up to 25,000 different mortgage schemes.
Currently, there are not many 100% mortgages on the market but there are some, they do have certain requirements that have to be met and a mortgage broker can discuss these with you and check if you qualify
If you do not qualify for a mortgage with no deposit or guarantor mortgage, a gifted deposit could be an option. A gifted deposit is a sum of money given by a family member or friend to help someone buy a property, typically a first-time homebuyer. The gift is usually given to the homebuyer, who then uses it to cover part or all of their deposit on the property they wish to purchase.
In the UK, gifted deposits are a common way for family members or friends to help someone get onto the property ladder, as it can be difficult for many first-time buyers to save enough money for a deposit. The amount of the gifted deposit can vary.
Lenders will typically require proof that the gifted deposit is genuinely a gift, and that it does not need to be repaid. The person giving the gift may be required to sign a letter or form provided by the lender, confirming that the deposit is a gift, and that they do not expect any interest or repayment.
Lenders will usually require the person providing the gift to provide identification and proof of funds to ensure that the funds have come from a legitimate source.
It’s worth noting that a gifted deposit is not the same as a loan from a family member or friend. If a deposit is a loan, it will be considered as a debt and may affect the borrower’s affordability assessment when applying for a mortgage.
What Are the Pros and Cons of Taking Out a No Deposit Mortgage?
It’s important to note that getting a mortgage with no deposit can be risky, as you will be borrowing the full value of the property. This means that if property prices fall, you may end up in negative equity, where your mortgage is worth more than the value of the property. It’s important to weigh up the pros and cons and seek independent financial advice before applying for a no deposit mortgage.
- No need for a deposit: The most obvious advantage of a no deposit mortgage is that you don’t need to save up a deposit to buy a property, which can make it easier to get on the property ladder.
- Higher risk: Because you are borrowing the full value of the property, a no deposit mortgage is considered riskier for lenders. This means possible higher interest rates than with traditional mortgages, and you may be more likely to face negative equity if property prices fall.
- Tougher eligibility criteria: Lenders are likely to have stricter eligibility criteria for a no deposit mortgage. You may need a high credit score, a steady income, and other minimum criteria will need to be met
- Fees: Even if you don’t need to provide a deposit, you may still need to pay fees associated with the mortgage, such as arrangement fees, valuation fees, and legal fees.
- Limited availability: No deposit mortgages are rare and not widely offered by lenders, which means there may be limited options available to you.
As specialist Mortgage Advisors, Greenacre Financial Services are here to help with mortgages for those in a ‘no deposit’ situations.
A no deposit mortgage can be an attractive option for those who don’t have a deposit, but it’s important to carefully consider the risks and potential drawbacks before making a decision.
You should speak to an independent financial advisor and compare different mortgage products to find the one that best suits your circumstances. Speak to an expert here at Greenacre so we can help you secure a mortgage – whatever your situation.
If you have any questions about any of our services, including how can I get a mortgage with no deposit?, please do not hesitate to get in touch by calling us on 0203 3939 222.