A guide to no deposit mortgages

By Charlotte Yau

If you’re buying a home and looking for a no deposit mortgage, find out how they work, the pros and cons.

Heard rumours of a no deposit mortgage and wondering what on earth one is (or how that could even be possible!?) You’re now in the right place. We’ll use this article to break down every facet, from how they work and are different, to their benefits and disadvantages. You can also find out if you’ll be eligible for one and how to apply.

What are no deposit mortgages?

Rare but not entirely unicorns, they are out there if you look hard enough. The only type available at the moment is called a guarantor mortgage.

How do they work?

A guarantor is someone who literally guarantees they can pick up the slack if you fail to make the repayments on your mortgage. They put their own home or personal savings on the line on your behalf. If you don’t make your repayments on time, the money is taken from either of these places instead.

Some banks offer no deposit mortgages. Here is how it works. The guarantor puts a lump sum into a savings account with that bank; it is usually 10% of the purchase price of the home. So, for a £200,000 house, the guarantor has to store away £20,000.

As we’ve said, the bad news is that this can be taken from if you don’t pay on time and in full when you should. The good news, however, is that after three years, this money is released again, and will have earned interest during its time in the savings account too.

If they don’t have savings to be used as security, they can use their house instead. The mortgage provider is therefore able to claim money from the home in the ‘best’ case scenario, or even repossess their home in the worst cases. However, this will only happen if you can’t keep up payments on the mortgage yourself and fall behind.

How are they different?

A no deposit mortgage is different from a standard mortgage because the latter needs a deposit to secure it. The bigger the deposit the smaller the mortgage, and the lower the repayments and period of time they’ll have to be made over.


Criteria number one is that you have a family member or relative to help you out. Once they’re onboard, you need to be sure that they understand exactly what they’re agreeing to.

You also need to be:

- Over 18

- Buying your first property

- Buying a house worth up to a certain value. With Barclays, for example, this is £500,000.

- Not looking to buy property that has only just been built.


- You don’t need to have a deposit saved up.

- The guarantor makes money on their loan if all goes well, as they will accrue interest on their lump sum.

- You have rights to the property.

- Your interest is likely locked at a set rate for at least an initial number of years.


- It can be risky business. You might have a job with a steady income now but are you sure you’ll always have one? If you need to take off time for a bereavement or poor health, or are made redundant, will you still be able to make the payments?

- The mortgage you will get without a deposit will likely have a higher application fee, interest rate and lending charge.

- If the house you buy loses value you’ll end up in negative equity. You’ll then owe back more than the property itself is worth, which is not a good place to be in.

Application process

Finally, let’s look at how to get a mortgage with no deposit.

It’s best to compare the top no deposit schemes out there currently and what’s best for your circumstances. You can sort them by lowest initial rate, cheapest overall cost, most popular and a few other options. Currently, some of the best options are from Barclays or Scottish Widows Bank.

Figure out your options and then go and visit advisors in person. Take your time, talk through your options, make notes and ask any questions that come to mind. If you decide to proceed they can talk you through the application process from there on out.

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