100% Mortgages

The traditional way of buying a house was to save up for a few years and put together a deposit of 5% or 10% of the value of the house you intend to buy.

This was all well and good when house prices were are more sensible levels, but for many people saving up even a 5% deposit would take years and years.

There is however a kind of mortgage available which doesn't require a deposit - the 100% mortgage. With this kind of mortgage, the lender will advance you the entire cost of the property you're purchasing, along with the fees and charges involved in buying a home.

These mortgages can make getting onto the property ladder a much quicker process for first time buyers.

Drawbacks of 100% mortgages

If you're not providing a deposit, then you will naturally have no equity in your home when you first buy it, as your loan will be secured against 100% of its value.

In fact, if you've added the costs and fees of buying onto your mortgage, you'd actually owe more than your house is worth, a situation known as negative equity.

This means that if you default on your mortgage, the lender may not be able to fully recover costs through repossession, and so there is a greater risk to the lender.

What this all adds up to is you'll have to pay a higher rate of interest, you may have to pay a 'higher lending charge', and people with less than perfect credit ratings may struggle to get approved.

Mortgage deposit loans

If you really can't save up the 5% deposit needed by many lenders, then there's the option of taking out a mortgage deposit loan from a different lender.