100% Mortgages: Is Buying Without a Deposit a Good Idea?

In recent months, the property market has been buzzing with the news that 100% mortgages have returned. These products usually allow first-time buyers to purchase a property without putting down any deposit. For many, this sounds like a dream come true, particularly in a market in which saving for even a 5% deposit can feel impossible. But is a mortgage without a deposit genuinely a good idea or does it carry risks that outweigh the benefits?  

This article explores 100% mortgages, how they work, and the potential advantages and disadvantages of taking this route to homeownership.

What Is a 100% Mortgage?

A 100% mortgage covers the entire purchase price of the property (excluding purchase costs, such as solicitors’ fees and mortgage arrangement fees), meaning that the borrower does not put down a deposit. Such mortgages were popular in the early 2000s, but largely disappeared after the 2008 financial crisis, as lenders tightened their criteria to avoid risky lending.

The new wave of no deposit mortgage deals is designed to help first-time buyers stuck in expensive rental markets and when the cost of living makes it hard to save for even a modest deposit. However, lenders have introduced safeguards such as strict affordability checks and guarantor requirements (often family-based) in order to reduce the risk of negative equity. Some lenders require a family member to provide security against their own savings or property in case the borrower defaults. Others set stricter income criteria or limit the borrowing to a certain multiple of the buyer’s salary.

Such safeguards aim to protect both the lender and the borrower, as a house price fall would leave the borrower with negative equity, where they owe more than the property is worth, even if this temporary. Despite these, a no deposit mortgage still exposes buyers to higher risk if house prices decline or if their circumstances change.

Advantages of Zero Deposit Mortgages

1. Get on the property ladder sooner: For many, saving for a deposit is the biggest obstacle to homeownership. With a no deposit mortgage, you can buy now rather than spend years renting and trying to save while property prices continue to rise.

2. Escape rising rents: Renters can face significant rent hikes, which can swallow up any chance to save. Owning a home protects you against future rent increases, giving you more financial stability.

3. Family support structures: Some of the newer 100% mortgage products lean on family support, using their guarantees and savings as security. This gives parents a way to help their children buy their first home without having to gift cash and drain their savings.

4. Preserve your savings: If you have money saved, keeping it for emergencies rather than tying it up in a deposit can improve your financial resilience. Having a financial cushion can help protect against unexpected repair costs or loss of employment.

The Risks of No Deposit Home Loans

1. Negative equity: If house prices fall, you will owe more than your home is worth, making it hard to move or remortgage. This can trap you in your property or force you to sell at a loss. Any shortfall in the loan repayment would still need to met.

2. Higher interest rates: Because lenders see these loans as higher risk, mortgage rates on no deposit mortgage products can be higher than on more standard LTV (loan-to-value) mortgages. Over the term of your loan, this could cost you significantly more in interest.

3. Tighter criteria: Lenders may impose stricter checks, limiting how much you can borrow or requiring family guarantees that you might find difficult to arrange. This makes the application process potentially more complicated and demanding.

4. Limited product choice: The pool of 100% mortgages is still small, giving you less flexibility than if you had even a modest deposit.

Where Can You Get a 100% Mortgage Today?

Several lenders have introduced 100% mortgages:

• April Mortgages has launched a 100% mortgage with the option of a 10-year or 15-year fixed rate. This product aims to help buyers lock in rates for a significant period, giving them certainty in a potentially volatile interest rate environment.

• Gable Mortgages offers standard or new-build zero deposit mortgage options with a five-year fixed-rate. This may suit buyers keen on purchasing new-build properties, which often come with modern energy standards and fewer maintenance worries.

• Skipton Building Society has relaunched its well-known Track Record Mortgage, which is aimed at long-term renters who can demonstrate a solid rent payment history. Rather than requiring a deposit, Skipton considers consistent rent payments as evidence that the borrower can manage mortgage repayments, helping many borrowers escape the rental trap.

While these products can open doors for first-time buyers, it is vital to look closely at the terms, including interest rates, and the affordability and family guarantee criteria, of each lender. No deposit mortgages, although attractive, carry a higher risk and should be approached with careful consideration and independent advice.

Is a 100% Mortgage Right for You?

Ultimately, whether a 100% mortgage is sensible depends on your circumstances. If you have a stable income, supportive guarantor and confidence in the housing market, it could be your route on to the property ladder. However, you must be aware of the risks, particularly if house prices fall. It may be worth considering if renting for a little longer to save for a deposit could leave you better off in the long term. Speak to a mortgage adviser to explore whether a modest deposit might open up cheaper deals.  

Tips When Considering a Zero Deposit Mortgage

• Compare rates across different lenders. Differences in the interest rate can add up to thousands over the mortgage term.

• Check if you can get a family-backed option, which may offer lower rates. Family guarantees and family savings linked products can sometimes secure you a better deal.

• Read the terms of the guarantor agreement carefully and make sure that everyone involved understands their responsibilities fully.

• Stress-test your own finances. For example, what if rates go up by 3% or 5%? Knowing that you can still afford mortgage payments with higher interest rates can give you peace of mind.

• Consider waiting until you can save for even a 5% deposit if you possibly can. This could unlock more lender options and better rates, saving you money over time and reducing your financial risk.

Conclusion

The return of 100% mortgages is a positive for first-time buyers frustrated by the huge deposits required in today’s housing market. However, while no deposit home loans can solve one problem, they can introduce new risks that must be handled carefully. If you are considering a mortgage without a deposit, consider taking professional advice and involve your family fully in any guarantor discussions. It is wise to consult a mortgage broker to ensure that you understand the worst-case scenarios, such as negative equity or rising mortgage interest rates. Zero deposit mortgage products can help many people break out of the rental trap, but they should never be seen as an easy, risk-free shortcut to homeownership.

FAQs

Q. Is a 100% mortgage the same as a no deposit mortgage?

A. Yes, both terms refer to borrowing the entire property price without putting down your own deposit.

Q. Do I always need a guarantor for a 100% mortgage?

A. Almost always. Most lenders now require either a family guarantee or cash security to approve a no deposit mortgage.

Q. Are interest rates higher on no deposit home loans?

A. Generally, yes. Since there is no deposit buffer, the lender carries more risk, which is priced into the higher interest rate.

Q. Can I remortgage later if I start with a mortgage without deposit?

A. If your property value goes up and you build up equity, you may be able to remortgage with a better deal. But, if house prices fall, you could be stuck.

Q. Could I lose my home with a no deposit mortgage?

A. As with any mortgage, if you cannot keep up with your mortgage payments, your home could be repossessed. With no deposit, you are 100% leveraged, so the risks, including that of negative equity, are higher.

Additional Sources

https://www.introducertoday.co.uk/breaking-news/2025/05/its-back-the-100-mortgage-with-no-deposit/

https://www.ft.com/content/8349f57f-89b3-4f34-8e6c-1585c2190610

https://www.moneyhelper.org.uk/en/blog/everyday-money/what-is-a-100-percent-mortgage

https://www.mortgage-medics.com/the-pros-and-cons-of-choosing-a-100-mortgage/

https://ukmc.co.uk/can-first-time-buyers-get-a-mortgage-with-no-deposit-april-mortgages-say-yes/