Getting on to the property ladder can be difficult as saving large sums of money for a deposit isn’t necessarily feasible for everyone. So, if you’re struggling to save and are looking for information about buying a house without a deposit, take a read of our article below.
Is It Possible?
When buying a house you typically need at least 5% of the property’s value as a cash deposit. This means that it’s not possible to buy a house without a cash deposit, as mortgages for 100% of the property value do not exist (with the exception of some shared ownership schemes). However, there are other mortgage options out there that mean you will not have to put forward a deposit yourself.
What Are The Options?
There are various options available when it comes to securing a mortgage if you are unable to save for a deposit.
If you have a family member that is willing to help you get on to the property ladder, you can secure a loan against a guarantor’s property or savings. The lender may ask your guarantor to place their savings into an account, which they cannot access for a set period of time or until a certain amount of the mortgage has been paid off. They will have to be named on your mortgage as a guarantor and may have to pick up the repayments for you if you fail to do so.
New Build Developer Loans
Property developers sometimes offer to loan you enough money for a deposit towards a home that they have built. For example, a developer may lend you 10% of the house value as a deposit and ask to be repaid in full in 15 years. In order to do this you must ensure that you are able to afford both the mortgage repayments and the developer loan repayments.
A gifted deposit is a sum of money given to a homebuyer to put towards a property deposit. In order to use this method, the deposit must be a gift (as opposed to a loan), and lenders will require signed documentation providing the gifter’s name, their relationship to the buyer, the value of the gift and confirmation that the buyer (giftee) is under no obligation to repay the money.
Shared Ownership Mortgages
This government scheme can help lower income families (who earn less than £60,000) and first time buyers get on to the property ladder. Usually, you own between 25% and 75% of the property and you can have a mortgage for this share. You will also pay a reduced rent on the remaining percentage as this is owned by the government. Most mortgage lenders will require a deposit between 5% and 10% of the property value, however there are lenders that will offer 100% mortgages on shared ownership homes, meaning that you may be eligible for a mortgage with no deposit.
Although it may be difficult to buy a home without a deposit, it is possible under the right circumstances and there are a range of options out there to help you. Through our partner business, Life Financial Services, we can offer you a complete mortgage and insurance service, with one point of contact right through from start to finish. They can provide you with impartial financial advice based on your personal needs and recommend suitable products to fit your current circumstances.