There is certainly a much reduced choice of 100% mortgage loans available at the moment. 100% mortgages for first time buyers are often particularly difficult to find.
What is a 100% LTV mortgage?
The loan to value (LTV) ratio is the percentage of a property's value that you have to borrow, so if you have no deposit, the LTV is 100%. The higher the deposit you can raise, the more mortgages you'll be able to find, which means a greater choice of low interest rates.
So who offers 100% mortgages?
'100% LTV', (100% loan to value) mortgages are still available, but not all are available to people trying to get on the property ladder. In fact most 100% mortgage lenders only offer these deals to their existing borrowers.
Other lenders will only consider extending a no deposit mortgage to you if you are a first time buyer that's already an existing customer of the bank or building society, e.g. a savings account or current account holder.
That said, 100% mortgages available to first time buyers without any 'existing borrower or existing customer' restrictions do come onto the market from time to time. These tend to be relatively few and far between and often have a limited availability, so you need to keep an eye on the market if you want to be in with a chance of securing a deal.
Most 100% mortgage deals are fixed rate, so if you want a discounted or tracker mortgage in order to benefit from any reductions in the interest rate, your choice will be further reduced. Similarly if you want your initial rate to last for longer than two years, you are also likely to have a restricted choice, although occasionally longer deals are available. It may be possible to find a deal, however you will have to be patient and dedicated to finding what you want and in some cases you may be lucky.
What 100% first time buyer mortgages are available?
The selection is currently fairly limited and generally involves a helping hand from a parent, other relative or friend. If that route is open to you, you may be able to find a 100% mortgage for first time buyers. The two main options are:
A guarantor agrees to take on some of the liability for your mortgage, so will be accountable for your payments if you can't make them. This will most likely mean the guarantor has to offer their own home as collateral on the mortgage
A relative deposits a lump sum for a percentage of the amount borrowed into a savings account with the mortgage provider for an agreed duration, usually earning little or no interest. After this term, the sum is returned to the relative if you have made all of your monthly payments on the mortgage.
Find the right 100% LTV mortgage
When comparing 100% mortgages, make sure you not only look at the interest rate, but also at the fees.
Fees that are typically applied to mortgages include account fees, arrangement, application, product, valuation and transfer of fund fees. What's more, with any mortgage where you borrow a high proportion of the property value, you can expect a 'higher lending charge' to be applicable too.
It's imperative that you take all of these fees in to consideration when you're carrying out your 100% mortgage comparison as they can add a significant amount to the overall cost. For this reason you should compare mortgages on the total cost over the term to find the cheapest deal.
You'll also need to make sure you are eligible for the deal before you apply.
Applying for a mortgage that you aren't eligible for (either because you aren't an existing customer or borrower, or you don't meet the income criteria) is a complete waste of time and you could end up harming your chances of getting approved to another deal that you would otherwise have been eligible for.
In an ideal world, a would-be borrower would wait until they have saved a deposit before applying for a mortgage.
However, you may feel there is little prospect of ever being able to save enough against the constraints of maintaining a family, or repaying student loans.
So if you're especially keen to get on the property ladder, 100 percent mortgages may be the answer.
While you will end up paying significantly more each month than a borrower purchasing the same property with a 30 per cent deposit, if you're currently renting it is possible that you find the monthly payments are comparable, if not lower.
Of course, when you buy a property you're also investing in your future as opposed to paying someone else's rent.
This should be weighed against the fact that a mortgage is a secured loan. As such your home will be liable to re-possession by your lender if your repayments are not maintained.
So you should only ever enter into a mortgage arrangement if you are totally confident you can afford the payments.
It is also important to consider that a mortgage is a long-term commitment, with repayments typically continuing for around 25 years depending on the term you take the mortgage over.
If you can't find a 100% mortgage deal that meets your requirements, take a look at our guide: How to Get on the Property Ladder if You've Got No Savings