A 100% mortgage is where you borrow the full amount needed to buy a property - or 100% loan to value (LTV) - rather than using a deposit. For this reason they are also sometimes also referred to as a no-deposit mortgage.
Typically the higher the LTV ratio, the greater the risk for the lender, so 100% mortgages tend to have higher interest rates than if you use a deposit when buying your home.
The only difference between a 100% LTV mortgage and any other mortgage is the fact that you don't need a deposit. Essentially, you're still borrowing a sum of money to purchase a property and then repaying it, with interest, over a set term.
As a buyer, it's important to consider that it's easier to fall into negative equity when you don't provide a mortgage deposit. This is because you don't hold any equity at the outset, meaning if your home falls in value, you'll owe more than it's worth.
This is because following the 2008 financial crash they were generally deemed to be too risky. Tighter restrictions on lending were introduced by the FCA (Financial Conduct Authority) and lenders withdrew their 100% products.
However, in 2023, buying a home has become out of reach for many prospective first-time buyers due to average house prices significantly outweighing average income, and a long spate of interest rate rises. This led to Skipton building society bringing out the first 100% mortgage in over a decade.
In June 2023 Skipton building society introduced a 100% mortgage aimed at those trapped in 'generation rent'. The Skipton deposit-free 'Track Record' mortgage is aimed at those renting property but unable to qualify for a mortgage to buy a home of a similar value to the one they're renting.
Although initially aimed at first-time buyers, Skipton have since broadened their criteria to include those who have been unable to get back onto the property ladder due to divorce, ill health, etc.
You'll need to provide at least 12 months proof of paying rent on time - and you won't be able to get a mortgage with repayments larger than the monthly rent you've paid during that time
You don't need to be a first-time buyer, but can't have owned a property anywhere in the world for at least three years
You can only borrow up to £600,000 and the property can't be a new build flat, or based in Northern Ireland
You don't need a deposit, but can provide up to 5% if you wish - this could provide you a small barrier from negative equity
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They allow borrowers to purchase a home without a deposit, which could mean getting onto the property ladder sooner
If using a guarantor or family assisted mortgage, they can be a great way for parents and grandparents to help their family buy a home
The interest rates are higher
You have no equity (share) in the property at the start of the mortgage, which puts you at a greater risk of negative equity if property prices fall – this may prevent you from moving or remortgaging until property prices rise again
If using a family member as guarantor, their finances are at risk if you're ever unable to repay the loan
If you're borrowing the entire cost of your new home, this may limit the value of property you're able to buy. Lenders typically offer around 4.5% your income, so:
If you earn £30,000, you may be able to borrow around £135,000 - so this is the value of the home you could afford to buy
If you added a 10% deposit - it's unlikely to change the amount you could borrow, as that's based on affordability - but you could buy a property worth £148,500 with the £13,500 deposit + £135,000 loan, increasing your options considerably
A mortgage calculator can help you to get an idea or the sort of mortgage size you might be able to get based on your income and deposit. Use our ultimate mortgage calculator to see what you might be able to borrow:
No, you won't usually be able to get a 100% buy-to-let mortgage. Some specialist finance companies may offer this option to portfolio landlords, but they'll usually need to put down another investment property as security, in lieu of a deposit.
Typically buy-to-let mortgage lenders require a minimum of a 25% deposit (although this can vary from 20-40% depending on the lender and the borrower's circumstances).
Although it's appealing to use a deposit-free option to get onto the property ladder sooner, there are other options that could help you to do so with slightly less risk.
An experienced mortgage broker will be able to advise you on which mortgage option is best for your circumstances.
If you're struggling to save a large enough deposit and are lucky enough to have family members willing to help, you might be able to supplement your deposit with a gifted deposit.
Not all lenders accept gifted deposits, and some limit the amount the can be gifted. Offering even a small deposit reduces the risk to both you and the lender, and is therefore likely to give you access to more competitive rates.
There are a number of home ownership schemes in the UK, offered by both the government and property development companies. Each is intended to help those struggling to save a deposit or meet the affordability criteria of taking out a mortgage to buy a new home.
It may be possible to get a loan for a house deposit but many lenders won't accept this. It's usually better to save up a deposit, use a gifted deposit from a family member, or opt for a guarantor or family mortgage.
In some cases, new-build developers may offer loans to help you with a deposit to purchase a property from one of their developments. However, it's important to check the terms and conditions of the loan, and make sure that you can afford to pay this back in addition to your mortgage repayments.
A mortgage is a huge commitment, and even more so if you're borrowing 100% of the cost of your home. It's therefore strongly recommended that you speak to a mortgage broker if you're unsure which type of mortgage is right for you.
100% mortgages give those without the ability to save a deposit another path into home ownership, so if you're able to qualify, are an attractive option for many. It's important that you understand the greater risk involved in borrowing at 100% LTV, rather than a lower level of borrowing, however, before you commit to one.
There are a number of home ownership schemes available across the UK that are intended to help people get a foot on the property ladder. Typically this is by either reducing the size of the deposit requirement, lending the deposit money, or providing access to specific properties that can be bought with less financial outlay.
That said, none of the schemes currently available allow borrowers to take out a mortgage without any form of deposit, so they are not direct alternatives.
Uswitch is not a mortgage intermediary and makes introductions to Mojo Mortgages to provide mortgage solutions. Uswitch and Mojo Mortgages are part of the same group of companies. Uswitch Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm reference number 312850. You can check this on the Financial Services Register by visiting the FCA website. Uswitch Limited is registered in England and Wales (Company No 03612689) The Cooperage, 5 Copper Row, London SE1 2LH. Mojo Mortgages is a trading style of Life's Great Limited which is registered in England and Wales (06246376). Mojo are authorised and regulated by the Financial Conduct Authority and are on the Financial Services Register (478215) Mojo’s registered office is The Cooperage, 5 Copper Row, London, SE1 2LH, and head office is WeWork No. 1 Spinningfields, Quay Street, Manchester, M3 3JE. To contact Mojo by phone, please call 0333 123 0012.
Last updated: 06 September 2023