First-Time Buyers Can Get On The Property Ladder With No Deposit

Getting your foot on the property ladder feels like an absolute impossibility these days. Even if you find the perfect 'affordable' home, the deposit is usually enough to send you packing to the comfort of your parents' home.

However, if it is the deposit that's holding you back, this could be your answer - 100 percent mortgages are making their first reappearance since slipping away back during the financial crisis back in 2007.

With a 100 percent mortgage, no cash deposit is required - so the time it takes to become a homeowner can be dramatically slashed.

A report on first-time buyers from the Building Societies Association said: "Most underwriters in the sector who we spoke to are not philosophically averse to lending 100 percent."

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However, you know what they say about all good things, they may have a catch - and in this case, 100 percent mortgages can be quite a risk to take. If a house price were to decrease, it could leave you in serious negative equity - meaning you'd actually owe more back to the bank than you borrowed, or than the house is even worth.

In fact, in the run-up to the credit crunch back in 2007 there were mortgages at 125 per cent of the value of the property - ouch.

But the BSA said in the report: "As long as there was sufficient affordability, then most lenders would accept that loan, assuming the borrowers' saved funds were used as the deposit.

"On the other hand, if that borrower had used the saved deposit for the car and therefore asked for a 100 percent LTV loan, the application would be rejected. The credit position is fundamentally the same, but the stance of lenders would be quite different."

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The report continued to say that the BSA do expect more building societies to look into this kind of deal in the near future.

It was added in the report: "Other lenders have developed products in which a collateral charge is taken over parents' property. This includes about a third of the building societies that participated in the BSA member survey.

"Whilst this is far from being a universal practice among building societies, a small and growing number are prepared to offer this facility."

So, it could finally be the start of millennials being able to get their feet on the property ladder - but is it worth the risk? Only time will tell.

Topics: UK News, News, Housing

Rachael Grealish

Rachael is a NCTJ qualified journalist from West Cumbria, with a passion for news, features and journalism. Outside of work Rachael loves plenty of coffee, running and reading.

@RachaelGrealish