In the financial free-for-all before the 2008 crash, cheap and 100% mortgages were commonplace for first time buyers (FTBs) keen to get on the property ladder.

However, the financial crisis, ironically caused by an over leveraged housing sector, saw hundreds of products pulled from the market almost overnight.

15 years on, FTB deals are still very much available with even one 100% mortgage on offer, but the days of rock bottom interest rates are sadly behind us as the Bank of England announced yet another interest hike earlier this week.


What is a 100% mortgage?

It may sound obvious but with a 100% mortgage you are borrowing the full value of the home rather than saving the minimum 5% deposit up-front. If you’re able to put forward a deposit then the risk to the lender is reduced so with 100 per cent mortgages you usually find the interest rates are higher to reflect the higher risk.

The main advantage is that you don’t need to save a deposit and, assuming you can make the repayments, you have the security of owning your home. The disadvantage is that there is always the risk of negative equity if there’s a downturn in the housing market and 100% mortgages are usually more expensive, i.e. a higher risk to the lender means the interest rates are higher.



How much can I borrow on a first-time buyer mortgage?

How much you can borrow is usually calculated by taking into account:

  • salary
  • outgoings
  • credit history

Michelle Niziol, is CEO of IMS Property Group. She explained: “Lenders typically will lend up to 4-4.5, sometimes up to 5 times a salary depending on outgoings and credit history. Checks are much more stringent now than compared to pre-2008 so expect to have to produce clear evidence to support your claims. Other incomes such as pensions, investments or earnings outside of any main salary can also be taken into consideration. Lending on new build properties is very positive at the moment with some lenders extending their mortgage offers to 12 months, also if rates do drop in that time frame, we can switch the deal to a lower rate of interest with no penalties.”

So what options are on offer to FTBs who don’t have huge or even any deposit to put towards their starter home?


What other non-deposit mortgages are available?

There are other “no deposit” mortgages on offer for FTBs.

Guarantor mortgage

A Guarantor mortgage is where someone – usually a relative – takes on some of the risk of the mortgage by acting as a guarantor. This can mean them offering savings or their own home as security against the loan.

One drawback that has to be taken into consideration is that the guarantor won’t own a share of the house and won’t be named on the title deeds.

Family offset mortgage

The family offset mortgage works in a similar way to guarantor mortgages but here they use savings as security.

This type of mortgage is linked to a savings account and the balance is used to reduce the interest charged against the mortgage. The savings aren’t actually used to repay a mortgage but ‘sits’ alongside it. The larger the savings the bigger the reduction on the interest payments and it still allows the account holders to withdraw from their savings account should they need to. The drawback here is that the savers will not receive any interest on their savings pot.

Over time, any FTB will hope that the value of their home will go up and, when their introductory fixed rate deal expires, they will have built up enough equity in their property to leverage for a better deal on their next mortgage. However, as any mortgage small print will tell you, the value of your home can go down as well as up so there is a certain amount of risk involved being tied to housing market values that are beyond your control.


Professional mortgage advice with IMS Property Group

It is important you speak to a professional mortgage advisor before making any decisions and find out which mortgage suits your circumstances. Need professional and impartial advice? Michelle Niziol and her team at the IMS Property Group can be contacted at 01869 248339 or