I want to buy a home but have no deposit: how to start (guide)
Buying a home without a deposit is uncommon, yet certain structured pathways may exist depending on individual circumstances. This guide explains lender requirements, guarantor roles, shared ownership schemes, and the documentation needed for affordability assessments. It helps readers understand the overall process before exploring options.
What are lender requirements for high-loan mortgages?
High loan-to-value mortgages, typically those exceeding 90% of the property value, come with specific lender requirements designed to assess risk. Most lenders require a minimum credit score of 580-620, though some may accept lower scores with additional conditions. Employment history plays a crucial role, with lenders typically requiring at least two years of stable employment or self-employment records.
Income verification becomes more stringent for high-LTV mortgages. Lenders often require detailed payslips, tax returns, and bank statements covering three to six months. Debt-to-income ratios must generally stay below 43%, though some lenders may accept up to 50% with compensating factors such as excellent credit history or significant assets.
How does guarantor and family-assisted financing work?
Guarantor mortgages allow family members to use their property or savings as security for your mortgage, enabling you to borrow up to 100% of the property value. The guarantor remains liable for mortgage payments if you default, making this arrangement require careful consideration from all parties involved.
Family-assisted financing includes several options: gifted deposits from relatives, family offset mortgages where family savings reduce interest charges, and joint borrower sole proprietor arrangements. These schemes often require legal documentation establishing the nature of financial assistance and any future obligations.
What are shared ownership schemes?
Shared ownership allows you to purchase a percentage of a property (typically 25-75%) while paying rent on the remaining portion. This government-backed scheme requires lower deposits, often just 5-10% of your share rather than the full property value. Monthly costs include both mortgage payments on your share and rent to the housing association.
Eligibility criteria include household income limits (usually under £80,000 outside London, £90,000 in London) and first-time buyer status in most cases. The scheme includes “staircasing” options, allowing you to purchase additional shares over time until you own the property outright.
What documents are needed for affordability checks?
Mortgage affordability assessments require comprehensive documentation proving your financial stability. Essential documents include three months of payslips, P60 forms, bank statements covering three to six months, and proof of any additional income sources such as bonuses or rental income.
Self-employed applicants need SA302 forms, tax year overviews, and certified accounts covering two to three years. Additional documentation may include proof of existing debts, credit commitments, and details of regular expenses such as childcare or maintenance payments.
How do you compare mortgage products effectively?
Effective mortgage comparison involves examining interest rates, fees, and terms across multiple lenders. Consider both fixed and variable rate options, paying attention to initial rates, standard variable rates, and any early repayment charges. Arrangement fees can range from £0 to £2,000, significantly impacting total borrowing costs.
Use online comparison tools and mortgage brokers to access deals from multiple lenders simultaneously. Consider the total cost over your intended mortgage term rather than focusing solely on monthly payments. Factor in additional costs such as valuation fees, legal fees, and mortgage protection insurance.
| Mortgage Type | Typical LTV | Deposit Required | Interest Rate Range |
|---|---|---|---|
| Standard Mortgage | 75-85% | 15-25% | 2.5-4.5% |
| High-LTV Mortgage | 90-95% | 5-10% | 3.5-5.5% |
| Guarantor Mortgage | 95-100% | 0-5% | 3.0-5.0% |
| Shared Ownership | 25-75% share | 5-10% of share | 2.8-4.8% |
| Help to Buy | 80-95% | 5-20% | 2.5-4.5% |
Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.
Navigating homeownership without a traditional deposit requires careful planning and understanding of available options. Government schemes, family assistance, and alternative financing methods can provide pathways to property ownership. Success depends on thorough preparation, realistic budgeting, and professional guidance from mortgage advisors who can identify suitable products for your specific circumstances. Remember that while these options can help overcome deposit barriers, they often involve additional considerations regarding long-term financial commitments and family relationships.
