It is quite difficult to get a mortgage. In fact, it is more than you would think. Along with excellent credit rating and good salary, mortgage lenders want you to have a house deposit. Unfortunately, most first-time buyers cannot save enough for a house deposit while renting. This guide explains how to buy a house with no deposit UK.
There is no need to worry as there are many to get a mortgage without a house deposit. Or if you have a small amount in your savings. It is important to know where to look.
First, let’s discuss the possibility of getting a mortgage without a deposit.
Is It Possible to Get a Mortgage Without a House Deposit?
The short answer is yes, it is possible. However, often mortgage lenders are reluctant to approve loans without a deposit. You must have a deposit of at least 10%. In a scenario where you do not have any savings, your options for lenders are limited. Additionally, you will find it difficult to get the best mortgage deal possible with high street lenders.
You can use a specialist mortgage broker to help you find out which lenders will most probably approve your application. Furthermore, through them, you can gain access to exclusive low deposit or even deposit free mortgage deals. These deals are such that they are not available through comparison websites.
What is a 0-deposit Mortgage?
Now, let’s talk about 0-deposit mortgage. What is it really? Well, it provides you with a way to step onto the property ladder without placing a deposit. They are also called no deposit mortgage or deposit free. In fact, they are referred to as 100% mortgages since the lenders lend you the full property price to purchase the house. Hence, you should know how to buy a house with no deposit UK.
Every mortgage lender has their own criteria. This means that terms and conditions depend on the lender you are dealing with. Usually, for a no deposit mortgage, you must use a family member or friend’s savings, property, or income as security. Even though you do not need any saving of your own, you do need the help of someone close to who is financially secure.
How to Buy a House With no Deposit UK
The good news is that there are various methods for first-time buyers to buy a house with no deposit. You can get a mortgage without placing a deposit first. You can find 100% mortgages offers, but they are no longer common. However, the following options are available for those who wish to purchase a home but cannot put down a deposit:
1. Skipton’s Track Record Mortgage
Skipton Building Society’s Track Record requires evidence that you can afford a mortgage. The evidence comes from your track record of timely paying household bills and rent in full for 12 months. If you meet these criteria, then it is possible for you to get the full value of the property without a house deposit.
Please note that Skipton’s No Deposit Mortgage is subject to credit score and affordability checks much like other mortgage schemes.
Besides a traditional mortgage, you have the option of a guarantor mortgage. This is also called a family assisted mortgage. Through this kind of mortgage, you can purchase a home with the help of your family member or friend. It does not matter if you do not have your own deposit. Your guarantor must consider using their savings, property, or income as security so that you can get a guarantor mortgage. Thus, it is important to know how to buy a house with no deposit UK.
The benefit of mortgage guarantors is that lenders can gain the confidence to approve an application that they otherwise consider risky. In case you cannot pay your mortgage, the lender can use the assets of your guarantor to cover your debt. There are various types of guarantor mortgages. Make sure to find the one that is most suitable for your situation. You can reach out to a mortgage advisor, and they will help you find the right one.
|Enables you to buy a house without a deposit||Can have higher costs, e.g., lender charges|
|Gets you on the ladder quickly||May take longer to pay off|
|Makes expensive property affordable||Possibility of negative equity|
2. Family Offset Mortgage
Another option for those who have no savings for a deposit is a family offset mortgage. This is also called a springboard mortgage. Through this, you purchase a home with your family member’s savings. They do not put these savings down as your house deposit. Instead, your family member will transfer their money into a special savings account. Your mortgage lender holds this account.
Suppose you cannot seem to save money and your parents are willing to help. Their savings amount to £50,000. However, they wanted to use it for home renovations and holidays in a couple of years. They don’t want their savings to go away forever.
Instead of giving their money as a house deposit to you, they can go for a family offset mortgage. They will transfer the money into an account that is linked to your mortgage. From there, the lender will take out the value of the savings from the loan. If you are going to purchase a £350,000 home, then you only need to borrow £300,000.
After an agreed period, your parents will receive their money plus interest. That is, if you make all your payments on time. The agreed period is usually from 3 to 10 years. In a scenario where you do not make your payments, the lender can withdraw from the savings accounts. It is their right to do so. Therefore, you should know how to buy a house with no deposit UK.
3. Dynamic Ownership
Onto the next method, Dynamic Ownership. Through this, you can purchase with a family member, friend, or partner. You both become joint owners. It is the ideal solution for those who do not wish to buy alone. This is also referred to as tenants in common. You and up to five others can buy a home together through Dynamic Ownership.
You can buy a more expensive property because you will have a larger combined income. It is not like a standard mortgage where you are joint tenants. Whereas, through Dynamic Ownership, each one of you can own a different share of the property. Whatever your contributions or deposits are, they are tracked. Therefore, by putting more in, you can own more. On the other hand, it does not matter how much joint tenants contribute to monthly repayments. They have equal equity in the property. Thus, it is essential to know how to buy a house with no deposit UK.
It is a great solution in case you do not have savings for a deposit. Your sibling or even your friend can place the required minimum deposit of 5-10% to get you the mortgage. When you cash out, you can know how much everyone owns. This is because everyone has a specific share of equity on the property.
4. Deposit Boost
As stated above, there are plenty of ways to get a mortgage with no deposit. Deposit Boost in another such method. For this, you require the help of a family member or friend again. In this situation, whoever your ‘booster’ is, will re-mortgage their property. Through which they will unlock some money. This money will go towards your deposit. After which you take out a mortgage of your own. You do so with a larger deposit.
You can use Deposit Boost to increase your down payment if you have your own savings. This will reduce the amount you need to borrow. However, you can still do this without any deposit.
Deposit Boost is how you can transfer wealth from home owning boomers to millennials and Gen Z who rent. Most people in their 50s and 60s have their own homes. It does not matter if they do not have a lot of savings. Grandparents and parents can help the youth get on the property ladder.
5. Income Boost
Moving on to the next option, an Income Boost. This is also called a joint borrow sole proprietor mortgage. The purpose of an Income Boost is to make passing lender’s mortgage affordability checks easier. Then you can get the loan you require purchasing the home of your choice. For this to work, you must add your family member or friend’s income to your mortgage application. This will boost the potential of your borrowing.
The person whose income you add to the application will not be on the deeds. You are the sole owner. Hence, it is called the sole proprietor. However, it is a “joint borrow”. So, in case you do not make your monthly repayments, your guarantor is legally responsible for covering them. The advantage is that you can borrow a larger mortgage because you have a larger combined income. Thus, you can get on the ladder quickly or maybe even afford to purchase a larger property.
An Income Boost can be a great way for a family member to help you get on the ladder without needing to have savings in the bank. It can also be a useful steppingstone to homeownership. If in a few years if you can afford the mortgage on your own, you can take your relative off the mortgage. Hence, you must understand how to buy a house with no deposit UK.
6. Deposit Unlock
Here is an option for those who only have a small house deposit to place. With Deposit Unlock scheme you can get a new build home by placing only a 5% deposit. Whether you are a home mover or a first-time buyer, this scheme is available to you. Nevertheless, you must meet the eligibility criteria and purchase a property from a participating building to qualify.
Remember, it is ideal to reach out to a specialist mortgage broker. This way, you can find the right deal for yourself. Do not worry if this one is not for you, as there is still one more remaining on the list. Therefore, you should know how to buy a house with no deposit UK.
7. Shared Ownership
Suppose you do not have any house deposit or perhaps just a small amount of it. Then, you can use Shared Ownership to attain your house. You can purchase a share of the property and pay rent on the rest through part buy part rent schemes. Since you are only buying a portion of the property, you do not need a large house deposit. Or even a large mortgage. Although, you need to place a minimum of 5% deposit with certain schemes. It is easier to save up for in comparison to a deposit for a full property.
Therefore, now you know how to buy a house with no deposit UK. If you do not know which option is best for you, then do not worry. You can reach out for expert advice on finding the right deal for yourself. With the help of these schemes, you can buy a home that you otherwise could not afford. Undoubtedly, it is an excellent way to get on the property ladder for those who do not have any savings.
How to Borrow for Deposit
You can borrow to cover your deposit in many ways. In case you do not have access to cash savings, then you can access funds.
It is not ideal to take out a loan to go towards your mortgage, which is a bigger loan. Nevertheless, some lenders can consider it. It depends on the circumstances, if they are right.
In some cases, lenders allow you to use a credit card. Through it you can top-up your deposit amount.
Remember that no matter what the case is, lenders asses your debt. They do this when they calculate your affordability. This can lead to rejection or perhaps worse rates.
Please note that is it is important to talk to lenders who are flexible. If not, then you can face immediate rejection. As a result, marks will appear on your credit file.
New Build Developers Loan
You can borrow from property developers to pay for your deposit on a home that they have built. In some cases, property developers give you this option.
You must pay back the agreed amount over a certain period. However, you must remember that you pay this amount in addition to your mortgage payments.
Getting the Help of a Broker
It is difficult to purchase a home with no deposit as you cannot get a mortgage. Luckily, there are methods to do so even if you have little or even no upfront money.
You can get in touch with a skilled advisor. They will have experience securing mortgages for clients who have no savings or funds for a deposit. Thus, they will guide you well.
Not only will they identify the right lenders who can handle your situation, but they will also navigate you through the process. Furthermore, you can learn about government schemes that you can qualify for from them. Therefore, you should know how to buy a house with no deposit UK.
To conclude, you might find it hard to get a mortgage to buy your home. However, you should not stress as there are ways to buy a property without a deposit. You can use certain schemes to help you get through the initial stages and climb onto the ladder. With the help of these methods, you can purchase the home you want without worrying about saving for a deposit.