How Much Can I Borrow on a First-Time Buyer Mortgage No Deposit?
Finding 100% mortgages for first-time buyers is unlikely, but if you have a guarantor or another alternative, such as a family offset mortgage, you might be able to proceed without any deposit at all.
In most scenarios, the first-time buyer deposit you need and the amount you can borrow depends on several variables, including:
- Other debts
- Your income
- Regular outgoings
- Credit score
Mortgage lenders usually multiply your salary by up to roughly four times, which is the cap on the total amount they will lend. Joint applicants can normally borrow a maximum of three times their joint income a year.
Understanding Loan-to-Value Ratios When Looking for the Best First-Time Buyer Mortgages
Lenders may advertise products stating the Loan to Value or LTV limit. This figure is the most they will lend as a percentage of the property price, so you will need a first-time buyer deposit for the balance. For example, a maximum 90% LTV means you need a 10% first-time buyer deposit to qualify.
Saving for a larger first-time buyer deposit can mean applying for an LTV of 90% or 85%, which means your lender perceives the application as a lower risk, which usually results in a more attractive interest rate.
Do 100% Mortgages for First-Time Buyers Exist?
It can be frustrating to pay a higher rent every month than you know a mortgage would cost, but without a first-time buyer deposit, it can be difficult to find a mortgage. However, you can find 100% mortgages for first-time buyers through specific products.
As we've mentioned, a guarantor mortgage is one option, where a relative, normally a parent, guarantees the loan – but they accept responsibility for making the repayments if you default.
Applying for a mortgage with a zero first-time buyer deposit is risky and can mean that you stand a chance of ending up in negative equity if house prices drop, so it isn’t usually recommended unless you have a specific scenario that makes this a viable option.
Taking Out a Loan as a First-Time Buyer Deposit
Few lenders will offer a personal loan if you intend to use the cash as a first-time buyer deposit because lending to an applicant for them to take on more debt increases the likelihood of non-payment and may not comply with responsible lending policies.
Mortgage lenders may also refuse to accept a first-time buyer deposit sourced through a loan, and it is common for them to verify the source of your funds to adhere to money laundering regulations.
Taking out a loan to cover your first-time buyer deposit means you are increasing your debt significantly, and if your debt-to-income ratio is high, a lender is more likely again to refuse your application.
If a lender is prepared to accept a first-time buyer deposit achieved through a loan, they will also likely offer a lower LTV cap, a higher interest rate, or both.
How to Save for a First-Time Buyer Deposit
Saving a substantial value for a first-time buyer deposit can be difficult, particularly where increasing house prices means the value you need to save keeps increasing.
There are lots of savings products that may be useful and help for first-time buyers is available through options like a Lifetime ISA, where you can save up to £4,000 a year towards a first-time buyer deposit and earn £1,000 every 12 months to boost your overall savings.
Alternative options include depositing an amount into a savings account directly from your payslip, using budgeting apps to cut down on your household expenditure, or even moving in with a friend or parent while you save as much as you can towards your first-time buyer deposit.
Applying for a Mortgage With a Gifted First-Time Buyer Deposit
If your family has the means to gift you an amount towards your first-time buyer deposit or pay all of the deposit, you need to be clear that the money is a gift, not a loan they are expecting to be repaid, to avoid the pitfalls we've mentioned above.
Most lenders will accept a gifted first-time buyer deposit, but the individual won’t have an ownership share in the property.
First-Time Buyer Deposit Requirements for Self-Employed Applicants
Self-employed mortgage applicants are riskier from the lender’s perspective because there is a greater potential for your income to change and affect your ability to keep up with your mortgage repayments.
In general, you’ll need a similar first-time buyer deposit as any other applicant, provided you have a good track history, a stable average income, and at least two or three years of self-employed accounts and tax returns to evidence your earnings.
Professional Help Finding the Best First-Time Buyer Mortgages
If you’re struggling to save a first-time buyer deposit, want to explore the options of applying for 100% mortgages for first-time buyers, or have been rejected due to your deposit value, please contact Revolution Finance Brokers at your convenience.
We commonly provide help for first-time buyers, and as an independent, whole-of-market broker can offer expert advice to help you find a product and lender who will help you move forward with your property purchase.
