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. 

Current 100% mortgage deals

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

Knowing how much you can borrow can be confusing, especially when it comes to 100% mortgages. Which? Mortgage Advisers can help first-time buyers get on the property ladder with our impartial and jargon-free advice. Call one of our expert advisers on 0808 252 7987.

If you want to compare mortgages yourself, seeing how they score for customer service as well as costs, check out Which? Money Compare.

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 fall. 

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.

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: What is a mortgage? Video guide - find out what type of mortgage is best for you

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Your home may be repossessed if you do not keep up repayments on your mortgage.

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