How much you can borrow on zero deposit mortgage that means couple now pay less than their rent
A couple who bought a house with a zero deposit mortgage and say they're now paying less each month on their mortgage than they did on their rent say they found out about it on TikTok.
Manchester couple Conroy and Amber struggled to save up the money for a deposit to buy a house, so they applied for a Track Record Mortgage from Skipton Building Society after they saw a video about it.
It lets them get a mortgage on a property with no deposit at 4.49 times their income, a deal which might work for some and not for others, as long as they can prove they've been able to pay rent over a consistent period.
There are lots of people who are throwing a big chunk of their pay packet into the pocket of some landlord when they could be at least paying into a mortgage and getting their foot on the property ladder.
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The couple managed to get a £300,000 mortgage on a rate higher than average, but Conroy, 32, and Amber, 28, said the monthly payments are still less than they were forking over for rent.
They told LADbible: "We live in the centre of Manchester for work so actually saving for a deposit wasn’t really an option. We also couldn’t rely on money from family so we weren’t sure when or if we’d be able to get on the property ladder."
What is a zero deposit mortgage?
The clue's in the name, it's a mortgage where you don't even need to put a deposit down on a property before you can move in and start paying off the massive debt you took on the property.
On the plus side it means people can 'buy' houses without having to save up massively for a mortgage in the first place, which is a big thing when the cost of living is so high that saving up to get a deposit is increasingly difficult.
Couple that with high house prices and for many buyers getting a deposit for a few percent of a house's value is almost impossible.
On the downside, the interest rate for a zero deposit mortgage is typically higher and if property prices fall and you're in negative equity that's really bad since you haven't actually 'bought' any of the house you're in.
You could end up taking a financial hit when trying to move out.
How much you can borrow on the Track Record Mortgage
Skipton Building Society says you can borrow up to £600,000 on their Track Record Mortgage, but what you'll actually be borrowing is tied to the value of the property you're looking to buy.
It's also realistically tied to how much you can pay in rent, since by getting a Track Record Mortgage you're using past rent payments to show the building society you have what it takes to keep up mortgage payments.
You need to show you've paid rent for 12 consecutive months during the past 18 months, and your borrowing limit is calculated by the amount of rent you pay.
The building society says that in some circumstances, they offer mortgages with monthly payments up to 150% of what you were previously paying each month in rent.
To check exactly how much you can borrow you can use Skipton Building Society's calculator, which can give you an idea of how much you can borrow.
Who can apply?
You must be 21 or over, have not owned a property in the UK in the last three years, and have paid rent and household bills on time and in full for 12 months in a row over the past 18 months.
You can't use the Track Record Mortgage to buy properties in Northern Ireland or the Isle of Man.
Ironically, you can actually use a deposit, but it must be no more than five percent of the property's purchase price.
Joe Harker