Buying a House With No Deposit

Your dream of owning a home is within reach! Discover multiple strategies to get your foot on the property ladder, even with limited or no savings. First-time buyers can secure a 100% mortgage with no upfront deposit, usually available to those with a consistent 12-month rental payment history.

It's a game-changer for renters who've found saving for a deposit challenging. Unlike traditional mortgage products which demand a 5-10% deposit, a no-deposit mortgage bypasses this requirement and ensures you're one step closer to homeownership.

However, low and no-deposit mortgages come with their own drawbacks such as higher interest rates and the potential of negative equity.

How can you buy a house with no deposit?

Struggling to save a deposit? A 100% LTV (no deposit) mortgage could be the key to homeownership.

First-time buyers often wonder how to get a mortgage without a deposit. In the current market, you'll usually need a deposit of 10% of the property value or at least 5% of a property's value to get a mortgage.

A mortgage lender would then lend you 90/95% of the property's value. But what if you don't have the capital to put down as a deposit? Here's how to buy a house with no deposit:

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Gifted deposit from parents

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100% mortgage - no-deposit home loans

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Loan from family or friends

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Buying your parent's house - 0 deposit homes

No deposit? Try a gifted deposit

This is where parents give their children money towards their deposit or gift them the entire deposit. The remaining balance is then funded by a mortgage, potentially a low-deposit mortgage depending on the gift amount.

Low-deposit mortgages come with higher interest rates. Lenders charge a premium to offset the increased risk. While they require less upfront money, the higher loan amount and interest rates lead to significantly larger repayments and if you plan to move soon, it might hinder your plans as you'll have much less equity for a new deposit.

Your solicitor will require a letter from your parents confirming that the money they are providing is a gift and that they have no rights to the property. The solicitor will also need ID from the parents gifting the deposit.

As part of the Anti-Money Laundering checks, your solicitors will also have to prove they know where the funds came from. For most, it’ll be from a sale of an asset (normally a house), savings or a pension drawdown. There might also be restrictions when gifting a deposit from overseas.

100% mortgage - no-deposit home loans

While rare, no-deposit homeownership is possible, but your options are limited. Like low-deposit schemes, no-deposit options primarily target first-time buyers and long-term renters with limited or no savings.

Mortgages are usually a percentage of the price of the home you're buying. A 100% mortgage means you're borrowing the entire value of the property, without needing to put down a deposit.

Most of the mainstream mortgage lenders require you to have saved up a deposit, making your loan a 90-95% mortgage. Lenders see 100% mortgages as a risk because you haven't put any of your money into the property.

You can buy a home with no deposit using a no-deposit mortgage where the deposit is offset by a helper, which could be a family member or close friend, for example, placing a sum equivalent to your deposit into a linked account.

It is effectively a 100% mortgage from your perspective as a borrower. A lender offering this kind of mortgage product will only make you a mortgage offer if you can prove that you have a 'good risk' regarding being able to make the appropriate monthly mortgage repayments.

Zero-deposit schemes leave you with no initial equity, slowing down your path to homeownership. Until your first mortgage payment, you have no equity in the home; this will increase with time, but it'll be a slow process.

This also means that a falling market can spell disaster for no-deposit mortgages; negative equity is a real threat. If you need to sell your home sooner rather than later and it's in negative equity, you'll have to cover the difference between the sale price and the outstanding mortgage balance.

A good credit score and low debt are crucial for no-deposit mortgage approval. Otherwise, lenders will reject your application as they see you as too high of a risk.

A history of missed payments or defaults will significantly impact your credit score and make you a less attractive borrower. Additionally, unstable employment or regular periods of unemployment might raise concerns about your ability to repay the mortgage.

Loan from family or friends

Loans from family or friends are becoming more and more popular to fund deposits. A loan is where the party giving you the money wants the money to be repaid and the terms of how and when it's repaid will need to be outlined in the contract.

The mortgage lender will need to be made aware of the loan before agreeing to the mortgage and they will require a professionally drafted loan agreement.

In some cases, rather than having a normal loan which is repaid it may be better for their contribution to your deposit to be reflected in a beneficial share of the property and protected with a Deed of Trust.

That way they get their share of the equity when you come to sell. If you want to pay back the loan before then, you can always agree to buy back their share.

Guarantor mortgages offer an alternative to no-deposit options for first-time buyers. A guarantor mortgage requires a family member or friend to 'guarantee' loan repayments will be made and covered by them in case you are unable to make payment. Guarantors risk their assets; their property or savings could be seized if you default on the mortgage, so it's crucial to get a proper loan agreement in place.

Deposit Boost and Deposit Loan

The Deposit Boost and Deposit Loan schemes allow buyers to borrow money from a family member to either increase their deposit for the new home or use the money in exchange for a share in the property.

Unlike guarantor mortgages, a Deposit Boost doesn't involve financial connections between the buyer and booster. This means that if you were to default on your mortgage payments, the booster (parents) wouldn't be legally responsible.

Buying your parent's house - 0 deposit homes

Buying your parent's house with no deposit is an opportunity for some parents to pass their property to their children. This is called a Concessionary Purchase or a sale under value.

Whilst the property could be worth hundreds of thousands of pounds, it can be transferred for a lot less or nothing.

• You cannot gift a house if you are insolvent.
• The gift may have an impact on inheritance, stamp duty, and capital gains tax purposes.

Buying your parent's house for lower than its market value could be seen as care home fee avoidance and deliberate deprivation of assets.