What is a 100 per cent mortgage loan? Are they good for first-time buyers and can you apply if you have bad credit?
A few of these types of mortgages have reappeared in the market for fist-time buyers - but are they worth it if you're struggling with the deposit?
THE dream of owning a home is becoming increasingly remote for millions of young Brits.
And that's not surprising when you think first-time buyers now have to fork out nearly £50,000 for a deposit to get their foot on the first rung of the property ladder.
But what if there was a way wannabe buyers could buy their own home without having to scrimp and save for that deposit?
A decade ago, borrowers were able to take advantage of lots offers that meant they didn't need to stump up any money before getting their mortgage.
One report says that building societies and lenders should bring them back for first-time buyers to ease the burden on parents.
We've seen a few of these mortgages reappear on the market but are they really worth looking at if you're struggling to get the funds together for a deposit?
What are no deposit mortgages?
When you're mortgage shopping, you'll see something called Loan to Value (LTV).
This is simply the percentage amount of the property that is mortgaged and the amount that is owned by you.
So for example, if you're buying a home worth £100,000 and have a 10 per cent deposit saved (£10,000) that means you'll need a 90 per cent LTV mortgage.
The bigger your deposit, the lower your LTV will be and the better deal you'll get as providers will think you'll be a good bet to lend to.
But with a "no deposit" or 100 per cent mortgage, the buyers borrows the entire purchase price of the property, without having to put down any money for a deposit at all.
How do you find the best mortgage deals?
IF you have or haven't got a deposit lined-up to buy a home, shopping around for a mortgage is the same.
Websites like Moneysupermarket and Moneyfacts have mortgage sections so you can compare costs and all the banks and building societies have their offers available on their sites too.
If you're getting confused by all the deals on the market, it might be worth you speaking to a mortgage broker, who will help find the best mortgage for you.
A broker will typically cost between £300 and £400 but could help you save thousands over the course of your mortgage.
You'll also have to decide on if you want a fixed-deal where the interest your charged is the same for the length of the deal or a variable mortgage, where the amount you pay can change depending on the Bank of England Base Rate.
Remember, that you'll have to pass the lender's strict eligibility criteria too, which will include affordability checks, and looking at your credit file.
You may also need to provide documents like utility bills, proof of benefits, your last three month's payslips, passports and bank statement.
And while you might be tempted to get a mortgage without a deposit, they tend to be more expensive than other deals, so you could be better off saving up instead.
You can check out our guide to the best first-time buyer mortgage deals here.
What happened to no deposit mortgages?
It's hard to believe for this generation of would-be house buyers but these type of mortgages used to be really common, with providers happy to lend the entire amount needed to buy the home.
But then in 2007, the financial crisis struck - and with money not flowing freely as it once was - lenders started to withdraw the mortgages from the market.
In fact, failed Northern Rock famously used to offer 125 per cent mortgages, with the idea that house prices would continue to rocket and the homeowner wouldn't be left with a home which was worth less than the mortgage - something called negative equity.
But when the credit crunch happened these deals started to disappear, with banks reluctant to lend at such high levels again and stricter lending rules coming into force.
What no deposit mortgages are available to first-time buyers now?
Ten years on from the financial crisis, some new 100 per cent mortgages have begun to be offered again but - crucially - they work in a very different way to the pre-crisis ones.
Money expert Andrew Hagger says: "100 per cent mortgages are still very rare and it is a very different situation compared with before the financial crisis.
"The only deals currently available are where the buyer gets some sort of assistance from a family member - so it's not even strictly as 100 per cent as they used to be."
Earlier this year, the Post Office launched two new mortgage deals which aim to help first-time buyers get onto the ladder even without a deposit, while Lloyds Bank's Lend a Hand mortgage will accept your parents cash instead.
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a grim task but there are schemes out there to help first-time buyers own their own home.
Help to Buy ISA - It's a tax-free savings account where for every £200 you save, the government will add an extra £50. But there's a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan - The government will lend you up to 20 per cent of the home's value - or 40 per cent in London - after you've put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime ISA - Another government scheme that gives anyone aged 18 and 39 the chance to save tax-free and get a bonus of up to £32,000 towards your first home. You can save up to £4,000 a year and the government will add 25 per cent on top.
Shared ownership - Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you're restricted to specific ones.
"First dibs" in London - London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative - A government scheme that will see 200,000 new-build homes in England to be sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest .
The Post Office's "Family Link" mortgage will see borrowers take out a 90 per cent LTV mortgage, with the 10 per cent deposit secured against mum and dad's home - as long as they're already mortgage free.
Buyers will then make two separate repayments for the first five years of the deal - their own mortgage payments and one towards the "assistor's mortgage" which is interest free.
Lenders my accept you on these deals even if you have a bad credit score as long as your guarantor's credit history is strong.
With Lloyd's Lend A Hand mortgage, parents who are willing to stump up the cash for a deposit can earn 2.5 per cent interest on their investment.
After the three years, whoever helped you with the savings funds will be refunded their 10 per cent plus interest.
Here are some of the other "no deposit" offers currently available:
Rate: 3.49 per cent, for 300 months, or 1.75 per cent discount on SVR
Fee: No fee
First-time buyers can get a 100 per cent mortgage with Tipton & Coseley as long as their family are happy that you secure 20 per cent deposit against their property.
If you have a mortgage with Nationwide, you can borrow against the equity in your home and gift that money to a family member to use a deposit for their own home. Buyer must take a Nationwide mortgage out for this too.
Rate: 2.85 per cent, three-year fixed
Fee: No fees
First-time buyers can get a 100 per cent mortgage with Barclays if their parents or loved ones can stump up 10 per cent of the purchase price. The money is held in a savings account and is returned after three years with interest if make all your mortgage payments.
Are these mortgages any good?
Like with all mortgages, theses deals are a huge financial commitment - and have pros and cons.
Mortgage expert with L&C, David Hollingworth told the Sun that that these deals can offer a good alternative for those struggling to get together a deposit for a home.
But he warned that both buyers and their parents need to be aware of what they're signing up for, with the risk of their own home being repossessed if their child doesn't keep up with the payments.
He said: "Lenders recognise that in many cases parental or family help will be crucial to giving first time buyers a leg up onto the ladder.
";Whilst that will often be through a straight cash gift towards the deposit, these schemes can offer a useful alternative and innovative approach.
"That could really help where parents want to assist their child but may not have a lump sum they can afford to give to their child but do have equity in their own home that they are prepared to offer as added security to support the first time buyer.
"But it's vital for parents to understand the impact of these schemes, as there will be potential implications for them as well.
"Most notably, putting cash or equity down as security puts it at risk and in theory the parental home could ultimately be repossessed if things did go badly wrong."
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