Zero Deposit Mortgages Explained: How They Work in the UK

It’s no secret that saving a deposit is one of the biggest barriers to buying a home. While most mortgage lenders require at least a 5% deposit, a small number of UK lenders are now offering 0 deposit mortgages that removes the deposit barrier and can help people step onto the property ladder quicker.

As the lender is financing 100% of the purchase price, zero deposit mortgages will often have stricter affordability and eligibility checks than many standard mortgages.

In this article, we explore exactly how these types of mortgages work, who could benefit from these mortgages and the key advantages, risks and alternatives to help you decide whether a zero mortgage is the right choice for you. Let’s begin.

What Is a Zero Deposit Mortgage?

A zero deposit mortgage is sometimes referred to as a mortgage with no deposit and it allows borrowers the opportunity to purchase a property without contributing an initial cash deposit. These mortgage products are designed to remove the deposit barrier, allowing for an earlier opportunity for borrowers to get onto the property ladder.

With a zero deposit mortgage, the lender finances the entire purchase price. As such, these mortgages usually come with higher interest rates, stricter affordability criteria and are not provided by all lenders.

While each lender who offers this mortgage product will have their own criteria, they are most commonly aimed at first-time buyers who have demonstrated strong financial management but have been unable to save a deposit, despite paying regular housing costs such as rent.

How Do Zero Deposit Mortgages Compare With Traditional Mortgages?

Both mortgage types will follow the same application and home-buying process, however, the way lenders assess a borrower’s risk is very different.

With a traditional mortgage, your deposit naturally reduces the amount a lender needs to finance and provides an immediate equity stake in the property. A zero deposit mortgage removes that deposit requirement, resulting in a greater level of risk for the lender.

Here are the key differences:

The biggest advantage of choosing a zero deposit mortgage is being able to purchase a home sooner  without the need to spend years saving for a deposit.

With that said, it’s important to note that borrowing the full purchase price can come with additional risks, including a greater chance of falling into negative equity if property values decline, fewer remortgaging options until you’ve built up equity, and paying interest on the entire value of the property.

This is the reason why many lenders who offer zero deposit mortgages will apply a stricter affordability criteria before approving the mortgage loan.

Who Is Eligible for a Mortgage With No Deposit?

While anyone can apply for a 100% LTV mortgage, these products primarily target long-term renters with clean credit histories who can prove consistent monthly housing payments.

To be eligible, borrowers will usually need to provide evidence of the following:

• A stable and sufficient income to comfortably afford the mortgage repayments
• A good credit history with no significant recent adverse credit
• Responsible financial management, including keeping up with existing credit commitments
• Affordability based on income, regular expenditure and other financial commitments
• A consistent rental payment history

Ultimately every lender will follow their own unique criteria and meeting the listed requirements does not always guarantee approval. Instead, lenders will use their own affordability model and underwriting process.

Which Lenders Offer 0 Deposit Mortgages in the UK?

There are currently only a few lenders who offer a true zero deposit mortgage product that will finance 100% of a property’s value. Each product can work differently, with some designed for long-term renters who can demonstrate a consistent history of rental payments, while others allow for family support through a unique mortgage scheme.

These mortgage products tend to fall into three distinct categories: rental history mortgages, family-assisted mortgages and joint borrower arrangements.

It’s important to note that these products listed above are available at the time of writing. Mortgage products and eligibility criteria can change and so it’s always worth checking the latest lender requirements or contacting a mortgage broker before applying.

Each of these products is typically aimed at borrowers who can comfortably afford monthly mortgage repayments but have struggled to save a deposit because they are already spending a significant proportion of their income on housing costs.

This is most common in areas like London, where high rental costs consume a large proportion of monthly income, leaving little opportunity to save for a deposit.

Skipton Track Record Mortgage Criteria

The Skipton Track Record Mortgage is one of the few true 0 deposit mortgage products that are currently available in the UK. It is designed for first-time buyers who are currently renting and can demonstrate a consistent income.

The Skipton Building Society’s track record mortgage is often one of the first options borrowers encounter when researching deposit-free ways of purchasing a property. Rather than relying on family support or a guarantor, this product is aimed at renters who can demonstrate a strong financial profile but who are unable to build a deposit because of high renting costs.

To be eligible for the track record mortgage, applicants will need to meet criteria such as:

• Aged 21 or over
• Be a first-time buyer
• No adverse credit
• Borrowing limit of £600,000
• 12 months of continuous rental payments

Although each of these requirements play an important role in the assessment, applicants will still need to pass Skipton’s standard affordability checks and lending criteria before a mortgage can be approved.

Alternative Low-Deposit Mortgage Products

For those borrowers who don’t meet the eligibility requirements for a complete 100% LTV mortgage, then there are several lenders who now offer low-deposit alternatives. These can still provide the benefit of reducing the total deposit amount usually required, while offering a little more flexibility in options.

As the table highlights, many of these alternative low-deposit products are only available on selected fixed-rate mortgages, often with a minimum five-year fixed term.

Ultimately, these products have been created with the mindset that one of the biggest obstacles for some buyers is not affording a mortgage each month, but it is saving a deposit while paying rent. As a result, low-deposit alternatives can still provide a practical route onto the property ladder for buyers who have strong affordability but haven’t yet built the level of savings typically required for a standard mortgage.

How Much Can You Borrow With No Deposit?

A big misconception about 0 deposit mortgages is that not having to save up for a deposit will mean that you will be able to borrow more. In reality, the deposit and your borrowing capacity are always assessed separately.

Removing the deposit requirement simply reduces the amount you need to save upfront, while the amount you can borrow is still based primarily on your income and affordability. For example:

• Income: Used alongside an income multiple to calculate how much you may be able to borrow
• Affordability: Your regular expenditure, existing financial commitments and monthly outgoings are assessed against your income to determine whether the mortgage remains affordable
• Property Value: Many 0 deposit mortgage products have maximum borrowing or property value limits, which can restrict the amount you can borrow, regardless of your income
• Lender Criteria: Every lender will have their own lending policy, affordability model and product-specific criteria. This means borrowing limits can vary even between similar mortgage products

Most mortgage lenders calculate borrowing using an income multiple. Although every lender has its own criteria, many will typically lend between four and five times an applicant’s annual income, with some offering higher income multiples where affordability allows.

 
It’s important to note that these figures are for illustration only. The exact amount you can borrow will depend on your chosen lender’s affordability assessment, lending criteria and your individual financial circumstances.

Whether you’re applying for a traditional residential mortgage or a no deposit product, lenders will still assess factors such as:

• Your income and employment status
• Existing loans, credit cards and other financial commitments
• Regular household expenditure
• Your credit history
• The property’s value and the lender’s affordability assessment

Can You Get a 100% Mortgage With Bad Credit?

Underwriters will always look at your mortgage application as a whole, and so while some specialist lenders may consider more complex circumstances, combining a mortgage with zero deposit and a poor credit history will significantly reduce the number of lenders that are available.

Lenders will usually consider factors such as:

• The type of adverse credit, such as missed payments, defaults or County Court Judgments (CCJs)
• How recently the adverse credit occurred
• Whether the issue has since been resolved
• The lender’s individual credit policy and product criteria

For borrowers with adverse credit, considering an alternative low-deposit mortgage rather than attempting to secure a 0 deposit mortgage for bad credit may provide access to a wider range of lenders and mortgage products.

Speaking to a mortgage broker before applying can help you understand whether any suitable lenders are available and avoid unnecessary mortgage applications that could leave additional searches on your credit file.

Speak to a Mortgage Broker About Zero Deposit Mortgages

Finding the right zero deposit mortgage can often be more complex than comparing interest rates alone. With only a small number of lenders offering these products, each with different eligibility requirements and lending criteria, understanding which options are genuinely available can be difficult without specialist guidance.

Working with a mortgage broker can assess your circumstances, explain which products you’re most likely to qualify for and compare lenders whose criteria match your financial situation. This can help avoid unnecessary delays with your mortgage applications while giving you a clearer understanding of the options available before you apply.

At Boon Brokers, we provide fee-free mortgage advice and have access to over 90+ lenders, including specialist providers. Whether you’re exploring a no deposit mortgage, comparing low-deposit alternatives or exploring first-time buyer mortgages, our advisers can help you find the mortgage that matches your needs.