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A 100% mortgage is a loan for the entire cost of the property you're buying, meaning you don't have to put in any deposit of your own.
This can sound appealing to first-time buyers who are struggling to save. But 100% mortgages are risky, and also very rare in the current market.
Our 90-second video explains the basics of 100% mortgages, how they work and who might be eligible to get one.
100% mortgages have been rare since the financial crash, but they are starting to make a comeback.
In May 2023, Skipton Building Society launched its Track Record 100% mortgage.
There are other 100% mortgages on the market but they are guarantor mortgages, which rely on you having a family member who's willing and able to help you out.
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Compare mortgagesWith a family deposit mortgage, your family can offer their savings or their property (or both) as security for your mortgage.
Savings as security
Here, your family member deposits cash - typically between 10% and 20% of your property's value - in a special savings account, and the money is held as security against the 100% mortgage.
Your relative will earn interest on their savings during this time, though the rate might not be as competitive as what they'd get from a regular savings account.
The cash is typically held until either:
Property as security
Instead of savings, your family member can provide a charge over their own home - typically between 20% and 25% of the value of the property you're buying - as security against your mortgage.
These work in a similar way to family deposit mortgages.
The main difference is that your family member won't earn interest on their savings.
The upside is that, when it comes to your own monthly mortgage payments, you'll only pay interest on the difference between the total value of the mortgage and the amount of savings held in the linked account - so you'll pay less interest than if the savings weren't there.
In the same way a traditional mortgage works, there is no requirement to have a guarantor.
These are very rare as providers are normally unwilling to lend without a guarantee the mortgage payments can be met.
In order to qualify, you will likely have to pass strict affordability criteria to prove you can afford to pay back the loan, such as evidence you've been reliable at paying rental bills.
As the mortgage isn't reliant on a family member, no one else's finances or home are put at risk.
The biggest risk with a 100% mortgage is that you could fall into negative equity, which means owing more to your mortgage lender than your property is worth.
For example, if you used a 100% mortgage to buy a flat worth £200,000 but its value dropped to £185,000, you'd still owe your mortgage lender £200,000 minus anything you'd already paid off.
This could cause you problems if you needed to move home or remortgage. You could end up trapped in your original mortgage deal paying a high standard variable rate unless you could find money from elsewhere to cover the shortfall.
As you pay off more of your mortgage and own more of the equity, negative equity becomes less of a concern - but in the first few years of a 100% mortgage, the risk is significant.
First-time buyers, home movers and homeowners who are remortgaging can all be eligible for 100% mortgages, depending on different lender criteria.
The number of deals is very limited so even if you have a family member who can act as your guarantor, there's no guarantee you'll be offered a 100% mortgage.
Before deciding whether to lend to you, the mortgage lender will scrutinise your finances to work out whether you can genuinely afford to make the repayments each month.
You're less likely to get approved for a 100% mortgage if:
If you're not able to get a 100% mortgage or you decide that they're just not right for you, you'll need to save a deposit of at least 5%.
Our guide to saving for a mortgage deposit is packed with helpful advice on how to build up your savings pot and eventually buy a home.
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