What is a 100% mortgage

A 100% mortgage is a way of borrowing the money you need to buy a home without paying a deposit.

A deposit is the money you normally pay towards your home before your mortgage starts.

Most lenders ask for a minimum of 5% of the purchase price.

A small number offer 100% mortgages, which can be useful if you don’t have a deposit.

What types of 100% mortgages are there

At the moment all 100% mortgages are guarantor mortgages, which means you’ll need the help of family or a friend to get one.

There are two ways that someone can help you.

They can offer:

  • their property as security

  • their savings as security

Property as security

In this case a friend or family member uses their home as security against a percentage of your mortgage. The amount can vary between 20-25%.

It’s quite a commitment as the lender can claim the shortfall from them if you don’t pay your mortgage and your home is repossessed and sold at a loss.

Savings as security

For this type of 100% mortgage your family member or friend puts some money into a savings account with the lender for a certain amount of time.

It’s often 3 years before they can take out their money and they might not receive any interest.

Again, if your home is repossessed and sold at a loss, your helper may have to pay the shortfall.

100% mortgage products

With a Barclays Family Springboard Mortgage your relative or friend puts 10% into a Helpful Start account for 5 years.

If you keep up with your repayments for 5 years, your helper gets their deposit back plus interest.

The mortgage then continues.¹

Family offset mortgages

With a family offset mortgage you pay less interest than you would with a family deposit mortgage.

This is because you only pay interest on the difference between the mortgage amount and the savings in your family member’s linked account.

Your family member won’t earn interest on their savings, though.

The Yorkshire Building Society’s Offset Plus lets you link up to 3 family and friends’ savings accounts to your offset mortgage.

You can choose to either reduce your monthly payments or pay off your mortgage earlier.

Your family and friends can access their savings whenever they like.²

Family link mortgages

With the Post Office Family Link mortgage you borrow 90% of the purchase price as normal and the remaining 10% as a deposit secured against your helper’s home.

They must own their home outright.

Only your name is on the first mortgage and both your names are on the second mortgage. 

For the first 5 years you make 2 separate repayments. You pay interest on your own mortgage but not on your helper’s mortgage.

After that, you make one repayment each month towards your mortgage.³

Can I get a 100% mortgage

You may be able to get a 100% no deposit mortgage if you have a family member or friend who’ll help you.

They’ll act as a guarantor for the loan, which means they’ll be liable if you don’t pay your mortgage.

Should I get a 100% mortgage

A 100% no deposit mortgage could be an option if you’re not able to get your hands on a deposit.

But there are a number of drawbacks to them.

These include:

  • you won’t have many products to choose from so you won’t get the best rate

  • if you don’t pay your mortgage your family member or friend will be liable

  • you run a higher risk of falling into negative equity

100% mortgages and negative equity

Negative equity is when the value of your home is less than the size of your mortgage. 

This can happen if house prices drop. Lots of people fell into negative equity during the global financial crisis.

You’re at a greater risk of going into negative equity if you have a 100% mortgage as even a small drop in house prices could make the difference.

Being in negative equity could be a problem if you want to move or remortgage.

You might find yourself:

  • unable to switch mortgages to get a better rate

  • stuck on your lender’s standard variable rate and paying more than you should

  • unable to sell your home for a price that covers your mortgage

If you find yourself in negative equity speak to your broker or lender as soon as you can.

There are several things you may be able to do, such as make overpayments if you’ve got any savings, though you’d have to check with your lender first.

Read our blog about negative equity to find out more.

100% mortgages for first time buyers 

If you’re a first time buyer, and think a 100% mortgage isn’t for you, there are other options if you’re struggling to get a deposit.

You could:

  • learn how to save for a deposit

  • consider a first time buyer government scheme

Read our first time buyer guide to find out more.

Our best 100% mortgage deals this week

These deals are based on getting a:

  • £227,000 mortgage

  • over 25 years

We’ve looked for the best deals based on their true cost.

This includes:

  • interest

  • fees

  • incentives like cashback

Marsden Family Step

£25,981.72

True cost over initial period

£1,075.28

Monthly payment

Details

Based on getting a mortgage of £227,000 over 25 years. Includes £0 upfront fee. 2.99% initial rate reverts to 6.2% SVR after initial 31 month period, costing £1,450.79 a month for 269 months. That's a 5.6% APRC. True cost based on a 24 month period. 

Your helper has to have 20% of the property’s value in savings or equity in their own property.

This deal was last updated on 24th March 2020.

Barclays Family Springboard

£64,349.20

True cost over initial period

£1,070.57

Monthly payment

Details

Based on getting a mortgage of £227,000 over 25 years. Includes £0 upfront fee. 2.95% initial rate reverts to 3.24% SVR after initial 62 month period, costing £931.34 a month for 236 months. That's a 3.2% APRC. True cost based on a 60 month period. 

Before mortgage completion, the Helpful Start Account must receive a deposit equivalent to 10% of the purchase price of the property.

This deal was last updated on 24th March 2020.

All mortgage guides, calculators and deals

Sources

¹ Barclays Family Springboard Mortgage

² Yorkshire Building Society Offset Plus for Borrowers

³ Post Office Family Link Mortgage

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Your home could be repossessed if you don't keep up repayments on your mortgage.

You may have to pay an early repayment charge to your existing lender if you remortgage.

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