HOW TO GET A MORTGAGE WITHOUT A DEPOSIT

Explore the Benefit of Mortgage with No Deposit

Do you not have a deposit to avail a mortgage? You still can borrow funds with 100% LTV mortgage or mortgage with no deposit scheme. This facility is very rare in the marketplace where maximum lenders demand at least 5% deposit. A very few mortgage lenders in the UK are accepting mortgage applications with no deposit.

100% LTV mortgages are also called as guarantor mortgages, and they are more favourable to the first-time buyers. Individuals who want to mortgage after divorce are also finding this product useful to their financial interest.

Under the scheme, the borrowers can obtain the full amount needed to a home purchase, but without any deposit. However, they have to follow strict pre-requisites to apply for this, and those criteria differ between lenders.

Pledging Home or Savings as a Mortgage Security

To secure a mortgage with no deposit, your guarantor should either need to put their property as the security or can use the savings. However, you are not going to put the total value of your home as collateral; instead, it should be according to a set percentage (for example, 25%) by the lender.

On a similar note, if you as a guarantor are putting your savings as the security, you may not be allowed to transact your savings during the mortgage term. Directly or indirectly, the lender has the charge on to your savings.

How to Get a Mortgage with Bad Credit and No Deposit

It would be a considerable risk for the lenders to grant a mortgage with bad credit and no deposit. Hardly a few lenders would agree on to this, but still, there are a very few mortgage providers in the UK taking that risk. The only criterion is to ensure the repayment on time, and it can only be done through functional income status.

However, there is another possibility of getting a mortgage on these double benefits. Let us understand it with an example:

For example, Chelsea wants to buy a house for her dad worth £125,000. As she has poor credit and no deposit is available to apply for a 100% LTV mortgage, Chelsea cannot opt for the full value to borrow. If her dad ‘gifts’ 5% deposit to her, i.e. £6250, then she will need £118750 to mortgage. Therefore, Chelsea has the approval chances with a 95% mortgage.

If you follow the same, then Shine Mortgages knows those lenders, who are accepting this and approving the mortgage applications of the borrowers.

• The borrower has applied for 100% mortgage that means full of property value. But if the property rates fall in between, you end up borrowing more than 100% of the actual amount. Therefore, negative equity is the significant concern here.
• If you fall into the negative equity and later, you want to remortgages or moving home, then that negative equity will automatically shift to your next mortgage. It means you may lose the trust of the lenders.
• Losing the home of you or your guarantor is also the significant risk involved in this type of mortgage. It usually happens when you are not able to make a monthly repayment.
• The high-interest rates are the concern that can affect your mortgage chances. As you are buying a home for the first time, it can be challenging for you to hefty payout amount as the interest rates.

What are the Alternatives to 100% mortgages?

The mortgage with no deposit is more costly than 5% deposit mortgage. But the financial constraints force you to apply for this option. It does have some benefits too alongside disadvantages, but you can look over its alternatives as well. These may be:

• Gifted deposit - A gift of pounds from your parents that you can further use to pay the required deposit. It is quite a common culture in the UK. However, varied lenders have varied conditions and limits that can be offered as the gifted deposit. The family member needs to sign a declaration document that says there is no need to repay the gifted money.
• Government support schemes - You can opt for some government schemes such as help-to-buy for first-time buyers, shared ownership, benefits for long-term disabilities and many more. Do not forget that you need to prove your repayment capacity. The advantage of such schemes is that the initial costs are quite low than those offered by the other high street and private lenders.
• Sell your asset - You can also sell your asset and utilise the earned money to pay the deposit. This tip is majorly useful if you have an asset that gives no or less profit. Why not use it for a useful purpose and utilise the money earned through sale, to pay a significant deposit.
• Equity - You have the option of using the equity in another property that you own. People with higher equity always have brighter and sharper chances of approval. After all, it shows your smart management of money and wise decisions on investment.
• Joint mortgage – It is about applying for a mortgage with a co-applicant. With the income of two people, it is always easier to qualify for the funds quickly. Your partner or any family member or even a known, can apply for the mortgage with you. The joint applicant is equally responsible for the debt. The co-applicant is much accountable as compared to a guarantor.

Despite the substantial risk of negative equity, the trends of 100% LTV mortgage in the UK are massive nowadays. As being a reliable UK mortgage broker, Shine Mortgages displays all the offers on these mortgages from the prominent lenders. You can make your choice anyone from them and fulfil your financial purpose.