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No deposit 100% mortgages

Learn how 100% LTV mortgages work

100% mortgages are much rarer than they used to be. You may be able to get a mortgage with a 100% LTV or more without any deposit, but you may need a guarantor.
YOUR HOME/PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. The FCA does not regulate buy-to-let mortgages for commercial and investment properties.
Author
Atousa Homayounpour
Editor
James Andrews
Last updated
May 4th, 2023
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What is a 100% mortgage?

A 100 percent mortgage is a loan taken out for the entire cost of the property. These loans are also sometimes referred to as no-deposit mortgages, 100% loan-to-value mortgages or 100 LTV mortgages. 

LTV is the percentage of the amount you're borrowing compared to the property's value.

If your property is valued at £150,000, a no-deposit mortgage would mean you're borrowing the full £150,000 from the lender and not putting in any of your own cash up-front.

How does a 100% mortgage work?

Every mortgage has a loan to value ratio (LTV), which indicates the percentage of the property's value you can borrow. Most mortgage lenders expect you to pay a deposit upfront with a loan to cover the rest. The ratio between those amounts is used to calculate your LTV.

A 100% mortgage means that there’s no deposit at all, and the lender is offering to loan you the full value of the property. As this represents a greater risk for the lender, 100% mortgages are expensive with high-interest rates.

Once the mortgage is secured, you make monthly repayments that cover the total capital you borrowed as well as the interest owing on that amount. Once you’ve built up equity in your home, you could remortgage to get a better deal.

Can I get a 100% mortgage?

100% mortgages are considered risky by lenders because you aren’t offering a deposit. As a result, there are far fewer providers who offer 100% mortgages, and those that do often have very specific criteria in place. These include the following types of guarantor-style mortgages.

Guarantor mortgages

A guarantor mortgage means a family member agrees to guarantee your mortgage repayments. If you can't pay up, the guarantor has to step in.

The majority of lenders will require your guarantor to be a homeowner, and their property will be used as security against the loan. That means their home could be at risk if you default on the mortgage payments. 

You can get guarantor mortgages where savings are used as security instead of a property. In this case, the guarantor may have to offer up their savings to pay your mortgage if you don’t.

Either way, the guarantor is making a huge financial commitment on your behalf, and you'll need to talk to them about whether they're willing to do this.

Even if you do have a guarantor who's willing to help, some lenders will still ask you for a deposit. The bigger your deposit, the better the rates you'll be offered.

Family deposit mortgages

This is when a family member's savings are put in an account linked to your mortgage. These savings are used as an offset, making your repayments more manageable. Once a certain period has elapsed, or enough of the mortgage has been repaid, the guarantor gets their money back.

The lender will usually pay interest but the money generally has to stay in the account for at least the first five years. The money acts as security in case you can’t afford repayments.

You could also look into family offset mortgages which work in a similar way, but the family member will not earn interest on the savings. The money in the account is deducted from what you owe when interest is calculated, which means your monthly repayments will be cheaper.

Guarantor mortgages

A guarantor mortgage means a family member agrees to guarantee your mortgage repayments. If you can't pay up, the guarantor has to step in.

The majority of lenders will require your guarantor to be a homeowner, and their property will be used as security against the loan. That means their home could be at risk if you default on the mortgage payments. 

You can get guarantor mortgages where savings are used as security instead of a property. In this case, the guarantor may have to offer up their savings to pay your mortgage if you don’t.

Either way, the guarantor is making a huge financial commitment on your behalf, and you'll need to talk to them about whether they're willing to do this.

Even if you do have a guarantor who's willing to help, some lenders will still ask you for a deposit. The bigger your deposit, the better the rates you'll be offered.

Family deposit mortgages

This is when a family member's savings are put in an account linked to your mortgage. These savings are used as an offset, making your repayments more manageable. Once a certain period has elapsed, or enough of the mortgage has been repaid, the guarantor gets their money back.

The lender will usually pay interest but the money generally has to stay in the account for at least the first five years. The money acts as security in case you can’t afford repayments.

You could also look into family offset mortgages which work in a similar way, but the family member will not earn interest on the savings. The money in the account is deducted from what you owe when interest is calculated, which means your monthly repayments will be cheaper.

Advantages and disadvantages of a 100% mortgage

Advantages

You don't have to put up any money upfront
You get the chance to own your own home, faster than you would if you had to save up a deposit

Disadvantages

You could slip into negative equity – where you owe more than the value of your house
You are likely to need a guarantor, and that person is at financial risk
You will have less choice of lenders
You’re likely to pay higher interest rates

What are the risks of a 100% mortgage?

A key risk to be aware of with 100% mortgage is that you could go into negative equity.

Negative equity is when your property value is lower than the amount you owe on your mortgage. If you purchase a home with a 100% mortgage and property prices were to fall, you would fall into negative equity.

This can make it difficult to move home or remortgage - lenders won't normally let you switch your mortgage deal if you're in negative equity.

Another risk to be aware of is if you were unable to repay your mortgage for any reason and a family member has acted as a guarantor or has helped with a family deposit mortgage, their finances are at risk.

What are the costs of a 100% mortgage?

100% mortgages will typically have higher interest rates than other LTV mortgages as they're seen as riskier.

As well as looking at the initial rate, it's important to look at any additional fees involved such as:

  • Arrangement fee

  • Booking fee

  • Valuation fee

  • Telegraphic transfer fee

  • Mortgage account fee

Make sure to factor all these costs in when you compare mortgages to get the best deal for you and your circumstances.

Are 100% mortgages available for first-time buyers?

Yes, but usually only if you've got a guarantor and even then, banks and building societies might say no.

You need to do your research carefully and may need to work with a broker to find a lender willing to consider you.

Can you get a mortgage with an LTV over 100%?

Generally, it’s next to impossible to get a mortgage with an LTV of more than 100%, although a very small number of lenders offer negative-equity mortgages.

If you've bought a house or flat that's fallen in value, you may find you’re in negative equity.  This means that if you want to sell your current property, you'd have to pay the lender more to pay off your original mortgage loan than you receive from the buyer when you sell it. 

Under these circumstances, you could try to negotiate with your lender to change your mortgage, or you could think about letting your house instead. The other option is to stay where you are and hope that the value of your home rises in time. In this case, you would continue to pay your mortgage as normal.

What else do I need to know if I’m thinking of getting a 100% mortgage?

There are some important things to understand if you're thinking of getting a 100% mortgage.

  • Not all lenders offer them. Most mortgage providers will only loan up to 95% of the property's value, which means you need a minimum 5% deposit. You may need to shop around and consider niche providers.

  • Lenders see 100% mortgages as risky. That's because you aren't putting any of your own money into the property. 

  • Interest rates on 100% mortgages are usually higher because they are seen as a bigger risk. This could make repayments very expensive and make it harder to meet affordability criteria.

  • 100% mortgages aren't usually available for first-time buyers as this group is already considered high risk. Instead, you may need to save up for a deposit or see if your family may be able to gift you a deposit.

  • Shop around – 100 percent mortgages usually aren’t the best deals so it’s more important than ever to find the best rate you can.

“A 100% mortgage may help you get on the property ladder faster, but there are risks involved like being in negative equity. If you can save a small 5-10% deposit, you're likely to have access to much better mortgage rates.”
Author image
Atousa Homayounpour
Content Producer - Mortgages

100% mortgage FAQs

What does a 100% LTV mortgage mean?

Every mortgage has a loan to value ratio (LTV), which is the percentage of your property's value that you are borrowing.

With a 100% mortgage, you’re not putting in any deposit at all, so you’re borrowing the full value of the property. That means your loan is 100%.

Can I get a mortgage without a deposit?

Although they're much more unusual now compared to before the 2008 financial crash, you may be able to get a mortgage without a deposit. 

However, most 100% mortgages are guarantor mortgages, which means you can only get one if you can find someone (usually a family member) to act as guarantor and agree to be responsible for covering the mortgage payments if you cannot. 

For most other mortgages, you need at least a 5% deposit.

How can I save a deposit?

The more you save for a deposit, the more likely you are to be accepted for a mortgage and the less you're likely to pay in interest. There are a few ways you can try to save a deposit for your first home. You can do all, or a mixture, of the following:

  • Save money each month

  • Borrow from family or friends

  • Use money received as a gift* or inheritance

  • Stick to a monthly budget

  • Cut back on spending

  • Choose the right savings account

* The person who gives you money towards a deposit needs to declare that the money is a gift and not a loan. Inheritance tax rules mean that you could end up facing an inheritance tax bill on this money in certain cases.

Can I get a 100% interest-only mortgage?

No, you always need a deposit or equity in your current home to get an interest-only mortgage.

Interest-only mortgages are considered riskier, as you only repay the interest each month. This means you repay the full amount you borrowed at the end of the mortgage term, and need a repayment strategy in place for a lender to consider you.

They are not commonly offered for residential properties, but they are often used for buy-to-lets.

100% mortgages are always offered on a repayment basis, where you pay both part of the loan and the interest payment every month.

Can I get a 100% buy-to-let mortgage?

No, you always need a deposit to get a buy to let mortgage. Most lenders require at least a 20-25% deposit, and some may require more.

Does my credit record matter when getting a 100% mortgage?

Yes, your credit record is important as the more reliable you are as a borrower, the more likely lenders will let you borrow at competitive rates.  Lenders want to see proof of your ability to keep up your mortgage repayments.

They will take a look at your spending habits and assess your affordability, which may impact how much you can borrow. If your score is low, you may struggle to find a company willing to lend you the money you need.

Can I afford a mortgage?

Before applying for a mortgage, it's crucial that you check whether you can afford it. You can check if you can afford a mortgage by working out how much you earn and spend each month and comparing this to how much buying a home will cost you.

Are 100% mortgages a good idea?

At first glance, a 100% mortgage can seem like a tempting offer – you don't have to put up any money and you still get the chance to own your own home.

But you may be better off trying to save up a deposit of at least 5% before you approach lenders. That's because lenders offer much better deals to buyers who can show a history of financial discipline.

Lenders like to see borrowers put a deposit – or equity – into the property. It lowers the risk that you'll default on your mortgage.

About the author

Author imageAtousa Cunnell
Atousa Cunnell
Atousa is a Content Producer for money.co.uk, responsible for writing and editing a wide range of mortgage content that are helpful to the reader.

money.co.uk is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions.

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