100% Mortgages: Securing an Affordable Mortgage

How do 100% mortgages work?

100% mortgages, also known as no deposit mortgages, allow homebuyers to borrow the entire purchase price of a property without needing to provide a deposit. While they can be attractive to first-time buyers or individuals who may not have substantial savings, there are both risks and benefits associated with 100% mortgages in the UK.

How do I apply for a 100% mortgage?

To apply for a 100% mortgage in the UK, you typically follow a process similar to applying for any other type of mortgage. 

We would advise, as we do with all types of mortgage, to take professional advice from a mortgage broker (such as ourselves!) to ensure that you secure the best deal for your personal circumstances. We will, of course, give you all of the advice that you need, so that you can take the right decisions for you and your family. 

We will also take on the paperwork for you, and ensure that you have the best information, have the right documentation when required, and fully understand the costs and implications of taking on a 100% mortgage.

Whatever decision you take about your mortgage, remember that:


10 Steps to your 100% Mortgage Application

1. Research and compare lenders 

Start by researching lenders that offer 100% mortgages or no deposit mortgages. Keep in mind that not all lenders may offer these types of mortgages, so it’s essential to check their product offerings and eligibility criteria.

2. Assess your eligibility

Before applying, assess your eligibility for a 100% mortgage. Lenders may have specific requirements regarding credit score, income stability, and affordability. Ensure that you meet their criteria before proceeding.

3. Gather necessary documentation 

Prepare the required documentation for the mortgage application. This typically includes proof of identity, proof of address, bank statements, payslips or tax returns, and any other financial documents that lenders may request.

4. Get a Decision in Principle (DIP) 

Before applying formally, it’s advisable to obtain a Decision in Principle (DIP) or Agreement in Principle (AIP) from a lender. A DIP is a preliminary assessment of your mortgage eligibility based on the information you provide. It gives you an idea of the amount you may be able to borrow.

5. Find a property

Once you have a DIP, you can start searching for a suitable property within your budget. Keep in mind that the availability of 100% mortgages may impact the type and location of properties you can consider.

6. Submit the application

Complete the mortgage application form provided by the lender. Ensure that you provide accurate information and include all the necessary documentation to support your application. Submit the application to the lender either online or through a physical branch.

7. Mortgage valuation and underwriting

Once the lender receives your application, they will likely conduct a valuation of the property to assess its market value. They will also perform underwriting, which involves verifying your financial information and assessing your creditworthiness.

8. Mortgage offer

If the lender is satisfied with the valuation, underwriting process, and your eligibility, they will issue a mortgage offer. This offer will specify the terms and conditions of the mortgage, including the interest rate, repayment period, and any other relevant details. Review the offer carefully before accepting it.

9. Legal process and completion 

After accepting the mortgage offer, you will need to instruct a solicitor or conveyancer to handle the legal process. They will ensure that all the necessary checks and searches are completed, handle the exchange of contracts, and arrange the completion date.

10. Completion 

On the completion date, the mortgage funds will be transferred to the seller, and you will become the legal owner of the property. At this stage, you will begin making mortgage repayments according to the terms agreed upon.

Remember that the application process can vary slightly between lenders, so it’s essential to follow the specific instructions provided by your chosen lender. It’s also advisable to seek independent financial advice to ensure you make an informed decision and understand the potential risks and obligations of a 100% mortgage.

Risks of 100% Mortgages

1. Higher interest rates 

Lenders often charge higher interest rates on 100% mortgages compared to those with a deposit. This can result in higher monthly repayments and increased costs over the long term.

2. Negative equity

If property values decline, borrowers with 100% mortgages may find themselves in a situation of negative equity. This means the outstanding loan balance exceeds the value of the property, which can make it challenging to remortgage or sell the property without incurring a loss.

3. Limited product availability 

Following the global financial crisis in 2008, many lenders reduced or eliminated their 100% mortgage offerings. As a result, the availability of these mortgages may be limited, making it more challenging to find suitable lenders. They are now re-entering the mortgage market, and the 100% Skipton mortgage has been in the news most recently.

4. Stricter eligibility criteria 

Lenders may impose stricter criteria on borrowers taking out 100% mortgages, such as requiring a higher credit score or proof of stable income. This can make it more difficult for some individuals to qualify for these mortgages.

Benefits of 100% Mortgages:

1. Access to homeownership

The primary benefit of 100% mortgages is that they provide an opportunity for individuals who may not have significant savings for a deposit to become homeowners. It can help first-time buyers get onto the property ladder sooner.

2. Cash flow preservation 

By eliminating the need for a deposit, borrowers can preserve their savings for other purposes, such as home improvements, furnishing, or emergency funds.

3. Faster property acquisition

With a 100% mortgage, buyers can potentially purchase a property sooner since they don’t have to spend time saving for a deposit.

4. Increased property options

Without the requirement of a deposit, buyers may have more options in terms of the type and location of the property they can afford.

It’s important to note that the availability and terms of 100% mortgages can vary between lenders and over time. Considering the risks and benefits, individuals should carefully assess their financial situation, evaluate the affordability of repayments, and consider seeking independent financial advice before opting for a 100% mortgage.

100% mortgages advice and guidance from Liddle Perrett  Liddle Perrett Disclaimer

The information provided in this article was correct at the time of publication (May  2023)

Liddle Perrett Ltd is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of First Complete Ltd which is authorised and regulated by the Financial Conduct Authority.