Can You Take Out a 100% Mortgage with No Deposit?
If you’re a first-time buyer or someone who hasn’t been able to save up a deposit, you may be wondering if it’s possible to take out a 100% mortgage. In this article, we’ll explore the concept of 100% mortgages and discuss the options available to you.
Understanding Loan-to-Value (LTV) Ratio
Before we dive into the details, let’s first understand the concept of Loan-to-Value (LTV) ratio. LTV ratio is the percentage of the property’s value that you’re borrowing through a mortgage. For example, if you’re buying a house worth £100,000 and have a deposit of £10,000, your LTV ratio would be 90% (£90,000 mortgage loan divided by £100,000 property value).
Traditional 100% Mortgages
In the past, it was possible to find lenders to offer 100% mortgages, where you could borrow the full value of the property without a deposit. However, these types of mortgages have become less common since the financial crisis of 2008. Lenders now generally require borrowers to have a deposit to reduce the risk associated with high LTV ratios.
Alternative Options
While 100% mortgages without a deposit are rare, there are alternative options you can consider:
- Help to Buy Scheme: The Help to Buy scheme is a government initiative that provides assistance to first-time buyers. Through this scheme, you can access a mortgage with a deposit as low as 5% of the property’s value. The government provides an equity loan of up to 20% (40% in London) of the property’s value, which acts as additional security for the lender.
- Family Assistance: If you don’t have a deposit but have family members who are willing to help, there are options available. Some lenders accept a limited charge on a family member’s property as collateral, allowing you to secure a mortgage with a lower LTV ratio. This option should be carefully considered, as it involves potential risks for the family member.
The 95% Mortgage Scheme
Exciting news for those struggling to save up a deposit! The UK government has introduced a mortgage scheme that allows borrowers to access 95% mortgages. This means you can buy a property with a deposit as low as 5% of the property’s value.
Eligibility for the 95% Mortgage Scheme
The scheme is not exclusively for first-time buyers and is open to anyone who meets the lender’s criteria. However, lenders will still require proof that you can afford the monthly repayments on the loan. The property you’re buying must not exceed £600,000 in value, and it can be any property, not just new builds.
Seek Professional Advice
While the 95% mortgage scheme offers hope for those without a large deposit, it’s essential to seek professional advice from a reputable mortgage advisor. They can guide you through the process, help you understand the terms and conditions, and find the best mortgage deal for your circumstances.
While 100% mortgages without a deposit are rare, there are alternative options available, such as the Help to Buy scheme and family assistance. The 95% mortgage scheme introduced by the UK government provides an opportunity for those struggling to save up a deposit. Remember to seek professional advice to ensure you make informed decisions and find the best mortgage solution for your needs.
Contact Hudson Rose for Expert Mortgage Advice
If you’re considering taking out a mortgage or have any questions about the options available to you, don’t hesitate to contact Hudson Rose. Our team of experienced mortgage advisors can provide expert guidance and help you navigate the mortgage application process. Call us at 0330 122 9920 or email us at hello@hudson-rose.co.uk to schedule a consultation.
