If you’re contemplating the idea of purchasing a property without having to put down a deposit, it’s crucial to acknowledge the potential risks associated with this approach. While 100% mortgages do exist, they are not widely available and may not always be the most advisable option for prospective buyers.
Although these mortgages offer a lifeline to individuals aiming to step onto the property ladder without any savings, it’s important to proceed with caution and fully understand the implications of such a high-risk maneuver.
You can’t get a true zero-deposit buy-to-let mortgage in the UK — lenders need 20–25% down because the rent has to cover the loan. But you can buy a BTL without using your own cash: release equity from another property, bring in a joint-venture money partner, or use a lease option / rent-to-rent to control the property without buying it at all. Here’s how each one actually works.
You’ll need a 100% mortgage to buy a property without a deposit
Acquiring a 100% mortgage stands as the sole avenue for purchasing a property without having to provide a deposit upfront. Unless you possess the entire sum required for an outright purchase, this option remains the most viable for securing homeownership.
A 100% mortgage essentially entails borrowing the entire value of the property you intend to purchase, obviating the need for any initial deposit. For instance, if a property is listed at £100,000, a 100% mortgage loan would amount to the full £100,000. Typically, lenders stipulate a deposit payment, often around 30% of the property’s value, with the remaining 70% funded through the mortgage.
With the fundamentals of this financing method laid out, it’s essential to delve deeper into its intricacies and implications.
Can I get a 100% mortgage?
Acquiring a 100% mortgage poses a considerable challenge for most individuals, presenting a hurdle in the path to homeownership. Prior to the 2008 property crash, these mortgages were commonplace and in high demand, with some lenders even offering loans exceeding 100% of the property’s value, albeit with dire consequences. The aftermath of the economic downturn saw a tightening of lending standards, ushering in stricter criteria for mortgage approval.
In the wake of the financial crisis, the availability of 100% mortgages dwindled, with only a handful of lenders still offering such products. Moreover, qualifying for these loans now necessitates meeting stringent eligibility requirements, often entailing the provision of a guarantor. Typically, this entails enlisting the support of a close family member who agrees to assume responsibility for the debt in the event of default, serving as a form of security for the lender.
Guarantor mortgages
As of now, I haven’t come across any 100% mortgages that don’t fall under the category of “guarantor mortgages.”
In a guarantor mortgage arrangement, typically a parent or another family member agrees to pledge their home or savings as collateral against the loan. They also commit to covering any missed mortgage payments by the borrower. These mortgages essentially function as secured loans, providing an option for individuals with limited or no deposit funds.
Two key points to note are: Firstly, securing a 100% mortgage will likely require a guarantor, usually a family member. Secondly, the guarantor must meet specific criteria, including having sufficient savings or owning a property, along with maintaining a good credit history.
Pros and cons of buying a property without a deposit
Pros
Certainly. Skipping the flowery bits, here’s a straightforward rewrite:
Sure, you’re skipping the deposit step, which is a big deal! That’s about it, really. But hey, it’s a significant advantage, so let’s focus on that.
Cons
Negative equity poses significant risks, creating various challenges. It happens when property values decline, leaving the mortgage amount higher than the property’s worth. For instance, if you buy a property for £100,000 and its value drops by 5%, your mortgage debt remains £100,000 while the property’s value falls to £95,000.
One major issue with negative equity arises when seeking to remortgage, as lenders are hesitant to remortgage properties in negative equity. Consequently, you may be stuck with your current lender’s high Standard Variable Rate, leading to increased monthly mortgage payments.
Additionally, 100% mortgages often come with higher interest rates. Larger deposits not only grant access to a wider range of mortgage products but also to those with lower interest rates. Moreover, securing a 100% mortgage typically requires a guarantor, putting a family member at risk and potentially straining familial relationships, especially if payments are missed.
Where can I get a 100% mortgage?
Mortgage products undergo frequent changes, often disappearing from the market and being replaced rapidly. Therefore, recommending a specific 100% mortgage product today might not be viable tomorrow.
Considering this, it’s advisable to explore Habito’s free online mortgage brokerage service. They scour the entire mortgage market, with access to over 90 lenders and 20,000+ mortgages. With a vast array of options catering to diverse borrower needs, they also offer complimentary expert advice.
Can I get a 100% Buy-To-Let mortgage?
As this blog primarily caters to landlords, let’s tackle a burning question.
Before delving into specifics, let me emphasize the sheer folly of considering a Buy-to-Let (BTL) property purchase without a deposit!
During the 2008 property crash, numerous landlords bearing 100% BTL mortgages suffered catastrophic losses.
I’m nearly certain 100% BTL mortgages are a relic of the past. In today’s market, securing such financing is virtually unheard of. A minimum 15% deposit is typically required for BTL mortgages, and even that may not suffice.
In my view, pursuing 100% Buy-to-Let mortgages is akin to courting disaster. If that’s your intent, kindly redirect your efforts elsewhere!
Consider a 95% mortgage (the benefits of putting down a deposit, even a tiny one)!
The truth is, considering a 100% mortgage suggests a level of financial strain or urgency. I understand the predicament.
However, I’d advise against opting for a 100% mortgage whenever possible. Even a modest deposit is preferable to none. Placing a small 5% deposit reduces risk and vastly broadens your mortgage options.
If saving for a 5% deposit means waiting six more months and enduring less-than-ideal living arrangements, it’s a sacrifice worth making. I say this fully aware of the pitfalls of 100% mortgages and the havoc they can wreak if things go south.
A 95% deposit unlocks numerous opportunities. And if you can muster up even more, all the better.
More Buy-to-Let mortgage guides from Property Accelerator
Frequently asked questions
Can you get a buy-to-let mortgage with no deposit?
Not a true 0% deposit on the property itself — BTL lenders need 20-25% down because the loan is sized on rental cover. What people mean by “no deposit” is using none of their OWN cash: releasing equity, a JV partner, or a lease option.
Do 100% mortgages exist in the UK?
A handful of guarantor and family-backed 100% residential products exist, where a relative secures the loan against their own property or savings. They do not extend to buy-to-let — those still need a deposit.
How can I invest in property with no money of my own?
The realistic routes are joint ventures (a partner funds the deposit, you run the deal), lease options, and rent-to-rent. Each trades something — profit share, ownership, or capital growth — for the lower cash-in. See my low-capital property guide.
Is buying with no deposit a good idea?
It increases both your potential return and your risk, because you have no equity buffer if values fall. It works best when the deposit is borrowed cheaply against strong existing equity, or when a partner shares the risk — not as a way to over-stretch on a single deal.
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