Can I buy a house without a deposit in the UK?
The short and simple answer is yes! With the recent re-introduction of 100% mortgages this is now an option that has become available again.
What is a no-deposit or 100% mortgage?
A 100% mortgage is where you don’t have to put down any deposit to purchase a property, and instead take out a mortgage to cover the full purchase price of a property.
The last UK lender offering standard 100% mortgages, where no deposit was required, withdrew from the market in 2008 after the financial crash. That was however until the start of this month when Skipton Building Society decided to re-release the first 100% mortgage which goes by the name of a ‘Track Record Mortgage’.
Who could benefit from a 100% mortgage?
We all know how difficult it can be to get onto the property ladder, especially in the most recent years where property prices have significantly increased. Since the 2008 market crash a minimum of 5% deposit has been required and with the average purchase price in the UK being around £310,000 this equates to a £15,500 deposit. This can be overwhelming for most, especially with the ongoing cost of living crisis.
The new 100% mortgage is aimed at first time buyers that are looking to get onto the property ladder, but are struggling to save for a deposit due to the high cost of monthly rent. It works by allowing first time buyers to buy a property without providing any cash deposit themselves.
How does a 100% mortgage work?
Currently, you must be a first time buyer that can demonstrate a track record of affordability of all monthly rent and household expenditure for a minimum of 12 months in the last 18-month period. There is an option to put down a deposit if preferred, but anything above 5% would go onto a standard mortgage product. The monthly mortgage payment must be equal or lower than the average of the last 6 months rental cost – e.g. if the average rent over the last 6 months is £800, the mortgage payment must be £800 or lower.
A few other elements you should be made aware of:
· You must be a first time buyer
· You have to be aged 21 or over
· You must have had no missed payments on debts / credit commitments in the last 6 months
· The max loan that can be taken out is up to £600,000 (subject to affordability)
· You can’t buy a new build flat
· You must have proof you have paid rent for at least 12 months in a row, within the last 18 months
· You must have 12 months experience paying all household bills within the last 18 months.
· You meet the Household to Household criteria i.e. the same people who are renting currently will be applying for the mortgage.
Where can I find a 100% mortgage provider?
Currently Skipton Building Society is the only lender with 100% mortgage products on the market, but it is likely other mortgage lenders will introduce them depending on how Skipton’s product is received.
Can you still get 100% mortgages?
Yes, you can as of today’s market. I would certainly advise speaking with a mortgage adviser to double check what products are available as the mortgage market is an ever changing environment.
How do I apply for a 100% mortgage?
Applying is the same as applying for a standard mortgage, except you currently have to hit Skipton’s lending criteria. Personally I would recommend speaking with a mortgage adviser that can check your eligibility as well as keeping up to date with the market in case any further products were to become available.
When applying for a mortgage it can be a stressful time, especially when you’re looking for a specific mortgage product like a 100% mortgage. By speaking to a mortgage adviser with their knowledge and guidance this will make the process a lot smoother and save you a few grey hairs over the house buying process.
It maybe that you are not eligible for the 100% Mortgage, by using a mortgage adviser, we will be able to guide you on other government backed schemes which are designed to help people onto the property ladder.
Article written by Mortgage & Protection Adviser Daniel Sykes. Visit his social media pages by clicking on the links below to find out more and to see how he could help.
Contact us today if you have any further questions about how we can help you, or get a FREE MORTGAGE QUOTE today using our online form from the ease of your home!
*The above information is true as of the 29th of May 2023 when this article was written