100% Mortgages?!

How You Can Get on The Property Ladder Without a Deposit

Many people dream of owning a home, but the roadblock of a large deposit has stood in the way. However, with the announcement of 100% mortgages (mortgages that don’t require a deposit) aspiring homeowners can now bypass this obstacle and buy their dream property without emptying their bank account.

In this article, we delve into the workings of 100% mortgages, including eligibility criteria, application processes, benefits and their hidden downsides that could catch you out if you’re not careful. So, sit down, grab a coffee and get ready to put yourself on the property ladder!

What is a 100% mortgage?

A 100% mortgage allows first-time buyers to borrow the entire purchase price of a property without the need for a deposit. Lenders provide the full loan amount, typically up to a certain percentage of the property’s value, based on their lending criteria.

What are the eligibility criteria for 100% mortgages?

To manage risk, lenders impose specific eligibility criteria for 100% mortgages. Some common factors include affordability assessment, timely payments track record, employment stability and a valuation of the property. Lenders assess an applicant’s financial stability, credit history, income and expenses to determine their ability to make mortgage repayments, which isn’t too dissimilar to how they check the criteria for standard, deposit-required mortgages.

How do you apply for a 100% mortgage?

The application process for a 100% mortgage typically involves several steps. First, research and compare lenders that offer 100% mortgages, considering their terms, interest rates and eligibility requirements.

Next, gather the necessary documentation, including proof of income, bank statements, identification, and evidence of a track record of timely payments. Seeking mortgage advice from a professional can provide valuable insights and assistance in finding the most suitable lender.

Using a mortgage broker will speed up this process substantially. Not only will they find you an option that has the best interest rates, but they’ll also ensure the lender you use is reputable and has a track record of happy clients. They’ll also scan the whole of market for you, meaning you don’t have to research tens of different lenders, you have one point of content who does the heavy lifting for you.

The advantages of 100% mortgages:

  • Elimination of Deposit Requirement: By bypassing the need for a deposit, 100% mortgages provide an opportunity for first-time buyers to enter the property market sooner.
  • Increased Accessibility: 100% mortgages widen homeownership opportunities for individuals with limited savings or difficulty in saving a substantial deposit.
  • Potential for Faster Property Acquisition: By removing the need to save for a deposit, buyers can accelerate their property purchase, potentially benefiting from price appreciation.

Considerations and downsides of 100% mortgages:

  • Higher Interest Rates: 100% mortgages often come with higher interest rates compared to mortgages requiring a deposit, as lenders adjust rates to mitigate the risk associated with higher loan-to-value ratios.
  • Limited Lender Options: The availability of 100% mortgages may be limited, as not all lenders offer this type of product. This is another reason why using a mortgage broker is so helpful. They’ll have access to a range of lenders who offer this product.
  • Risk of Negative Equity: In a declining property market, buyers without a deposit face a higher risk of negative equity, where the property value falls below the outstanding loan amount.

Get on the property ladder deposit free!

There is a lot to consider before applying for a mortgage. Yes, the thought of not needing a deposit is an exciting one, but you need to carefully read the small print before you jump into the first offer you’re given by a lender. The last thing you want to do is pay no deposit but then be paying a premium in interest every month.

We have the in-house skills, experience and network of lenders to find you a mortgage offer that’ll leave you with a full bank account. Discover more about what options are available to you, and how much you can borrow, by booking your free consultation here.