What is a 100% mortgage?

A 100% mortgage is one where you put no money down as a mortgage deposit and the lender gives you the whole property price as a mortgage. These used to be very common before the financial crisis but they are very rare now.

100% mortgages are very similar to guarantor mortgages as they lender will usually request some collateral upfront. Your guarantor will need to put their house down as collateral or a huge amount of savings in a bank account controlled by them.

If you default on your mortgage repayments then your guarantor could lose their home through a repossession.

Advantages of 100% mortgages

100% mortgages give an avenue for first time buyers to get on the property ladder

Disadvantages of 100% mortgages

These mortgages are considered very risky by some

If property prices fall you may end up owing more than your property is worth. This is known as negative equity.

The interest rates on a 100% mortgages are known to be very high as the loan to value is 0%.

There are very few of these products and hence it will be harder to compare against other products

These mortgages are usually expensive to arrange and have higher mortgage arrangement fees. The mortgage lender will also request a Mortgage indemnity guarantee which protects the lender in a case you default. This will be at a cost to you.

Although low mortgage deposit mortgages appear cheap, the consequences might end up being way too much. Request the services of a good digital mortgage broker to advice you on low deposit mortgage you may be eligible for.

You should also consider home buyer Government mortgage schemes such as the help to buy equity loan and the shared ownership scheme.

John Bate

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.