Mortgage deposit explained 100% mortgages

House of notes

100% mortgages are extremely rare for most first time buyers today

As the name suggests, a 100% mortgage will allow you to borrow the full value of the property you want to purchase without the need to place a deposit with your lender. 

There are almost no 100% mortgages on the market, except if you can get assistance from a family member. 

The risks of 100% mortgages

The biggest risk of 100% mortgages is that you will instantly be in negative equity - owing the bank more than your property is worth - if house prices fell. 

When 100% mortgages were more common many people took out the loans banking on increasing property prices to quickly reduce the loan to value. When the property bubble burst in 2007/08, thousands of borrowers were faced with the prospect of negative equity, high repayments and the risk of job loss as the wider economy faltered.

Current 100% mortgage deals

Only one provider currently offers a 100% mortgage deal. In September 2011, Aldermore Bank launched the Family Guarantee Mortgage, whose features include:

  • Allowing you to borrow 100% of the value of a property
  • A family member must be willing to guarantee any amount above 75% of the value of the property
  • This means that parents or grandparents must guarantee 25% or lower of the value of the property. So if you were to borrow £200,000, the guarantor would have to be willing to place a £50,000 charge on their home.
  • No money from the guarantor is required upfront, but if your house was repossessed, your parents would be liable for any shortfall.
  • Two year and three year fixed rate deals are available at 5.98%
  • The mortgages are available on a repayment basis only

100% mortgage alternatives

For most first time buyers, you will need to build up a deposit of at least 5% of the value of the property you want to buy. There are a number of 95% mortgage deals available for first time buyers, but tend to come with higher interest rates than those with lower loans to value (the amount you can borrow against the value of the property).

Go further: 95% mortgages - find out if you're likely to be eligible for this product 

Need mortgage advice?

We believe you should seek independent mortgage advice before taking out a mortgage. The Which? Group offers an independent mortgage advice service, Which? Mortgage Advisers, that looks at every mortgage from every available lender. You can also find an independent mortgage adviser using the Unbiased.co.uk website.

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