No Deposit Mortgage: How To Get One Easily
Make your buying a home dream come true with a no deposit mortgage, even if you are low on budget! By reading this guide, find out how to get a mortgage, especially when you have zero deposit.
We’ll explain everything you need about LTV (loan to value) and zero deposit mortgage. So, start reading to delve into further details;
What is a No Deposit Mortgage?
In a no deposit mortgage, you can borrow the entire or 100% amount to purchase your own or first home. For instance, if the house price is £300,000, you can get a £300,000 mortgage. However, a zero deposit mortgage or LTV (loan to value) has many terms and conditions.
To win the zero deposit mortgage or buy a house with no deposit, you must fulfil the eligibility criteria and lender’s conditions. This is not only for first-time home buyers, but 0% deposit mortgages might be available for other buyers.
A zero deposit mortgage also has zero upfront costs or charges.
How Can I Get 0 Deposit Mortgage?
Like other mortgages and schemes, a 0 deposit mortgage has some fees. You can apply for this deposit mortgage directly or with the help of a broker. However, you have to pay for the broker fee.
Here are a few steps you can follow to get a zero deposit mortgage;
- Choose a 0 deposit mortgage deal that suits you the best.
- Hire a mortgage broker only if it is worth hiring.
- Apply for a decision in principle
- Complete your paperwork by providing all evidence and details.
- Apply for 0 deposit mortgage.
Remember that it takes work to get your 0 deposit mortgage application accepted, and sometimes, it might lead to negative equity as well. So, choose a mortgage consultancy or broker wisely to get a mortgage with no deposit.
Are No Deposit Mortgages Available for All?
0% deposit mortgages were widely available before the financial crisis in the UK 2008. During and after the economic crisis, lenders found it too risky to offer 0 deposit mortgages even to first-time home buyers.
According to a recent report by Moneyfacts, the UK market for zero deposit mortgages has only made up 0.3%.
Can I Get a Zero Deposit Mortgage With a Bad Credit Score?
A few possibilities exist for getting a zero deposit mortgage with a bad credit score. A guarantor mortgage is the foremost and best way to get a mortgage with a bad credit score. Do you know about guarantor mortgages? If not, let’s learn about it first;
What is Guarantor Deposit Mortgage?
Under a guarantor mortgage, you don’t require any deposit; you only need a guarantor. It is one of the best ways to get a mortgage if you have low credibility or a bad credit score.
Remember that your guarantor has to cover the payments if you fail to pay. A guarantor could be anyone from your family, but not necessarily only from your family. Regarding guarantor mortgages, people prefer to give their savings rather than property for security.
Unfortunately, the rates for guarantor mortgages are higher than typical mortgages. It could be a risk for you if you have zero savings or no deposit.
What is Family Deposit Mortgage?
In a family deposit mortgage, one of your family members must use his savings or property as security when borrowing a deposit to buy a home. Your family member needs to put 10%- 20% in savings at the decided time for the return of the borrowed amount.
However, the lender can only access the amount submitted in the savings account at the end of the time to pay back the mortgage deposit. If you fail to keep up with the monthly payments, the lender can access the amount in the savings account, which is kept as a security.
How to Get a 100% Mortgage Without a Guarantor?
Getting a 100% mortgage without a guarantor is only possible if you have good credibility and a high credit score. If your application for a 0 deposit mortgage got rejected, you could still get it with a guarantor, not necessarily your family member.
If you don’t have a guarantor, don’t worry; there are many more ways to buy a home with a low deposit in the UK.
You can consult a reliable and experienced property management firm, such as Home World Management, to find the best ways to buy a home with a low or even zero deposit.
What are the Advantages and Disadvantages of No Deposit Mortgage?
Getting a mortgage with no deposit always sounds amazing, but it has some benefits and drawbacks. Here are a few advantages of 0 deposit mortgage;
- The upfront cost to buy a home will be less than usual, as you don’t have a deposit. However, it is best to start with a small property.
- Even if the prices of houses are surging in the UK, you can still buy your home with a no deposit mortgage.
- You can build equity in your home with monthly repayments and overpayments under a zero deposit mortgage.
- You can get a 0 deposit mortgage if you have only rented the property for 12 months.
- There is no need to pay a deposit, even 5%, even if you can pay.
Here are also a few disadvantages of 0 deposit mortgage;
- You might need to pay for more even when your home is worth less, as the risk of going into negative equity will be high.
- You could need to pay high interest because there was no deposit.
- Because of its complexities, you might need to pay a high fee to get a no deposit mortgage.
- You might not have a choice or list of lenders as only a few building societies will offer 0 deposit mortgage.
What are the Alternative Options If I Don’t Qualify for No Deposit Mortgage?
No doubt, 0 deposit mortgage could be a great way to buy a home. If you cannot get a zero deposit mortgage for any reason, here are a few alternatives you can consider;
- Get a deposit to buy a house from your family member.
- You can buy a home with a 5% deposit by applying for a mortgage guarantee scheme in the UK. This scheme is only valid until the end of June 2025.
- Apply for a shared property if you have a low deposit or savings to buy a home.
- Apply for an equity loan to build your own home.
- Apply for a joint mortgage by agreeing with someone to buy a home on sharing.
Buying a home with a no deposit mortgage or under any other scheme is complex. You can make this process smooth and hassle-free with Home World Management, a leading UK property buying & selling firm.
Hire an Expert Mortgage Advisor with Home World Management
0 deposit mortgages are the best way to buy houses, especially for those struggling their entire lives. However, the no deposit mortgage process includes a lot of complexities.
Because of strict conditions and restrictions, a first-time home buyer might not be able to get a 0 deposit mortgage. Keep calm and contact Home World Management for an expert mortgage consultancy or advisor.
Whether you want to buy an ideal house within your deposit or make your 0 deposit mortgage application process successful, our advisors have extensive knowledge of mortgages. So, you can buy a house successfully and without any negative equities with HWM’s mortgage advisors.