I want to buy a home but have no deposit: how to start (guide)

The challenge of entering the property market without a deposit is one faced by many first-time buyers across the United Kingdom. Rising house prices and the cost of living have made saving for a traditional deposit increasingly difficult. However, various schemes and mortgage products have emerged to help bridge this gap, offering viable routes to homeownership even when you lack substantial upfront funds.

What are lender requirements for high-loan mortgages?

High loan-to-value mortgages, often referred to as 95% or even 100% LTV mortgages, allow buyers to borrow a larger proportion of the property’s value. Lenders offering these products typically have stricter criteria to mitigate their increased risk. You’ll need a strong credit history, stable employment, and proof of consistent income over at least the past three to six months. Many lenders will scrutinize your spending habits, looking for evidence of financial responsibility and the ability to manage monthly repayments. Some institutions may require you to complete a first-time buyer course or provide additional guarantees. Interest rates on high-LTV mortgages are generally higher than standard products, reflecting the greater risk to the lender. It’s essential to compare offerings from multiple lenders, as eligibility criteria and rates can vary significantly.

How does guarantor and family-assisted financing work?

Guarantor mortgages involve a family member or close friend agreeing to cover your mortgage payments if you’re unable to do so. This arrangement reassures lenders and can make approval possible even without a deposit. Typically, the guarantor must be a homeowner with sufficient equity in their property or savings to cover potential shortfalls. Some lenders may place a charge on the guarantor’s property or require them to deposit a sum into a savings account that remains locked for a set period. Family-assisted schemes can also include family offset mortgages, where relatives place savings into a linked account to reduce the interest you pay. Another option is a family springboard mortgage, where a family member deposits a percentage of the property value into a savings account held by the lender for a fixed term. These arrangements require careful legal and financial consideration to protect all parties involved.

What are shared ownership schemes?

Shared ownership allows you to purchase a share of a property, typically between 25% and 75%, while paying rent on the remaining portion to a housing association. This model significantly reduces the deposit required and makes monthly costs more manageable. Over time, you can increase your share through a process called staircasing, eventually owning the property outright if you choose. Eligibility criteria usually require your household income to be below a certain threshold, often around £80,000 outside London and £90,000 within the capital. Shared ownership is particularly popular among first-time buyers and key workers. It’s important to factor in service charges, ground rent, and the cost of repairs, as these can add to your monthly outgoings. While this scheme offers a stepping stone onto the property ladder, it may limit your choice of properties to those designated for shared ownership by housing associations.

What documents are needed for affordability checks?

Lenders conduct thorough affordability assessments to ensure you can sustain mortgage repayments. You’ll need to provide proof of identity, such as a passport or driving license, and proof of address through recent utility bills or bank statements. Employment verification typically requires payslips from the last three to six months, along with a P60 or tax return if you’re self-employed. Bank statements covering at least three months will be scrutinized to assess your income, regular outgoings, and spending patterns. Lenders will also request details of any existing debts, credit commitments, or financial dependents. If you’re using a guarantor or family assistance, additional documentation relating to their financial status will be required. Some lenders may ask for proof of savings or evidence of how you plan to cover upfront costs like surveys, legal fees, and moving expenses. Being organized and transparent with your documentation can speed up the application process and improve your chances of approval.

How do you compare mortgage products effectively?

Comparing mortgage products requires a clear understanding of interest rates, fees, and terms. Fixed-rate mortgages offer predictable monthly payments for a set period, while variable-rate mortgages fluctuate with market conditions. Consider the annual percentage rate of charge, which includes both interest and associated fees, to get a true cost comparison. Pay attention to arrangement fees, valuation fees, and early repayment charges, as these can significantly impact the overall expense. Online comparison tools can provide a snapshot of available products, but speaking with a mortgage broker often yields more tailored advice, especially for complex situations like no-deposit purchases. Brokers have access to exclusive deals and can navigate lender criteria on your behalf. Always read the terms and conditions carefully, and don’t hesitate to ask questions about anything unclear. Factor in your long-term plans, as some products may suit short-term affordability but cost more over the mortgage’s lifetime.

Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.

Navigating the property market without a deposit is challenging but achievable with the right approach. Understanding lender requirements, exploring family-assisted options, considering shared ownership, and preparing thorough documentation are all critical steps. By comparing mortgage products carefully and seeking professional advice, you can identify the pathway that best suits your financial situation. Homeownership may be closer than you think, even without substantial upfront savings.