Can I Buy A House Without A Deposit

March 13, 2023

0% deposit mortgages

In the UK, buying a house without a deposit is possible but challenging. It involves obtaining a 100% mortgage, covering the full property cost. However, most lenders typically require a deposit for risk mitigation

What’s a Deposit?

A deposit is a sum of money that the buyer puts down towards the purchase of the property. It is usually a percentage of the total price. It serves as a guarantee to the lender that the borrower is committed to the purchase and can afford the repayments. In the UK, the typical deposit is around 10% of the property’s value, although some lenders may accept as little as 5%.

Some lenders do offer 100% mortgages, although they are less common than they were before the 2008 financial crisis. These mortgages can come with higher interest rates and stricter lending criteria, as the lender is taking on more risk by providing a loan without a deposit. This means that the buyer will need to have a good credit history and a steady income to be considered for a 100% mortgage.

Should I Use A Guarantor

Another option for a First Time Buyer who is unable to raise a deposit is to use a guarantor. A guarantor is someone who agrees to pay the mortgage if the borrower defaults on the repayments. This can be a parent or grandparent etc. They will need to have a good credit history and be willing to take on the responsibility of the mortgage if necessary.

Is Shared Ownership Good For A First Time Buyer

Alternatively, a buyer can opt for shared ownership, purchasing a share (typically 25% to 75%) of the property and paying rent on the rest. Over time, they can buy more shares until they own the property. This suits first-time buyers with limited funds as they only need a deposit for their share.

Buying a house without a deposit is less common. It requires a strong credit history, a stable income, and options like 100% mortgages, guarantors, or shared ownership. Seek advice from a mortgage broker or financial advisor to choose the best option.

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