Compare 100% Mortgages

Saving a deposit to secure a mortgage can be tough, but with a 100% mortgage, a deposit isn’t required. This would seem to make 100% mortgages an ideal solution for first-time buyers, but you can be eligible for a 100% mortgage if you want to remortgage or move home too.

Here we explain how a 100% mortgage works and the things you need to be aware of from the start. In particular, you’ll find that fewer lenders offer no deposit mortgages, and if they do, the products can often prove difficult to secure. With a 100% LTV mortgage, a lender is taking on more risk, so you will need a guarantor who will back you up and make payments if you can’t. You’ll probably pay a higher interest rate than if you had a deposit to put towards a mortgage, and there’s the risk of falling into negative equity to consider, too.

However, if you keep all of this in mind, and track down a lender that is offering 100% deposit mortgages right now, then having no deposit doesn’t need to hold you back when buying a home.

What is a 100% mortgage?

A 100% mortgage is a mortgage that covers the full purchase price of a new home. Or to look at it another way, a 100% mortgage can allow you to buy a property with no deposit.

For this reason, 100% mortgages are also frequently referred to as 0% deposit mortgages or even 100% LTV mortgages – LTV stands for ‘loan-to-value’ and in this instance, 100% of the value of your home is being covered by a loan. The need to have a guarantor means they are often known as a guarantor mortgage too.

» MORE: What LTV means for a mortgage

How 100% mortgages work

100% mortgages work in much the same way as any other type of repayment mortgage in that monthly repayments will need to be made for the duration of a specified term. However, you should expect to see higher interest rates than if you’ve got a deposit to put towards a mortgage, and importantly you’ll need the backing of your family or a close friend to stand a chance of getting a 100% LTV mortgage.

Types of 100% mortgages

Lenders that currently provide 100% mortgages require borrowers to have a guarantor. This is to give them some security that someone is ready and able to step in should you fail to make your payments. Family members will typically take up this role, or sometimes a close friend.

A guarantor mortgage can be set up in a few different ways. Some lenders require that a guarantor allows a charge to be made over their home to provide security against a proportion of your mortgage. Often referred to as using property as security, the charge typically covers 20%-25% of the purchase price of the home you’re buying.

While a guarantor won’t own a share in your home, they promise to make the mortgage repayments on it if you can’t. But perhaps even more importantly, if the situation arises where neither you nor your guarantor can pay what you should, and your home is repossessed, a lender could also order the repossession of your guarantor’s home if there is a shortfall between the mortgage you still owe and how much your home is sold for.

Family deposit mortgages

Alternatively, some guarantor mortgages allow a guarantor to put up savings as security rather than their home. Sometimes known as a family deposit mortgage, here a guarantor is usually asked to make a deposit worth up to 20% of the value of your home into a set savings account. The pot must then remain in place for a certain number of years or until a predetermined percentage of the mortgage is paid off.

Assuming your mortgage payments have been met, the guarantor will receive their money back, along with interest. However, if repayments are missed, the lender may hold onto the money longer, or even use it to cover what is owed if you default and the proceeds from the repossession and sale of your home don’t cover the outstanding mortgage.

Family offset mortgages

A family offset mortgage operates in much the same way as a family deposit mortgage, but doesn’t pay interest on the funds that your guarantor has deposited. Instead, you won’t need to pay any interest on a part of your mortgage that is equivalent to the sum of money that has been set aside by your guarantor.

Family link mortgages

Some lenders offer family link mortgages, or variations on the same theme. Typically, these involve two mortgages: one specific to you at 90% LTV and then another at 10% LTV, which is secured against a property owned by a family member (there can be no mortgage on this). The buyer is liable for both mortgages, but the aim is to pay off the smaller ‘assistor’ mortgage, which is interest-free, entirely within five years. Repayments on the 90% mortgage must be paid at the same time, but the term can continue beyond five years.

Can you get a 100% mortgage?

Right now, relatively few lenders offer no deposit mortgages, so getting one is no easy task. It’s a far cry from before the 2008 financial crisis when 100% mortgages were widely available (and it was even possible to secure a mortgage for more than the value of a property).

A more cautious approach to lending brought about by the crisis, and new rules from the Financial Conduct Authority which put a greater onus on making sure mortgages are affordable to borrowers, saw lenders stop offering no deposit mortgages for a number of years.

Although some options have gradually returned, the onset of the coronavirus pandemic, during which lenders reined in lending to those considered riskier borrowers, has seen some providers suspend their no deposit mortgage products.

Can I get a 100% LTV mortgage?

Lenders can make 100% mortgages available to first-time buyers, those moving home and for remortgaging.

However, due to the extra risk a lender takes on if there’s no deposit, a 100% mortgage will only be attainable if you have a guarantor, who can offer additional security in case you are unable to make repayments, or if you’re an existing customer who wants to remortgage.

And even with a guarantor in place, a lender could still turn you down for a 100% LTV mortgage. To reach a decision, a lender will assess your eligibility and try to work out how much mortgage you can afford. Given the caution with which lenders approach these mortgages, having bad credit or significant debt will make getting a no deposit mortgage even harder.

Who offers 100% mortgages?

With most lenders still reluctant to take on the risk that no deposit mortgages pose, there are only a handful of providers that currently offer 100% mortgages. To find out who is offering them you can look at our comparison table above or you could consult a mortgage broker, who may be able to access deals that you can’t.

Benefits and advantages of a 100% mortgage

• Provides the chance to buy a home without needing a deposit.
• Could be an alternative to a gifted deposit if a family member wants to help a loved one onto the property ladder.

Risks and disadvantages of a 100% mortgage

• You will need a guarantor (almost certainly with a decent credit score) to support you, who is willing to put their property at risk.
• Money put up by your guarantor could be inaccessible for a number of years and is unlikely to earn the top rate of interest. With a family offset mortgage, there will be no interest at all.
• If house prices fall, and the value of your home decreases, you could be forced into negative equity, where what you owe on your mortgage is more than what your property is worth. This can make it very difficult to remortgage or to move home, and could see you tied into making repayments on a property that is falling in value.
• The pool of available 100% mortgages is very small.
• 100% mortgages are likely to be more expensive than a standard mortgage.

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