Skipton Building Society's no-deposit mortgage lets first-time buyers borrow the full purchase price, with payments linked to the rent they already pay, here is how it works and what to weigh up.
Skipton Building Society launched a 100% loan-to-value mortgage, known as the Track Record mortgage, designed to help first-time buyers finance the full purchase price of a property without a deposit.
What makes it different from other 100% mortgages is that it is linked to the rent you currently pay. The monthly mortgage payment cannot exceed the average of your last six months' rent, and the application still needs to meet Skipton's standard income multiples.
The product could benefit would-be buyers who can comfortably afford rent but struggle to save a deposit, particularly as deposit requirements and rents have kept rising. While 100% lending has raised concerns in the past, products like this are underwritten prudently, with affordability carefully taken into account.
It will not suit everyone, but it can help some buyers step off the rental treadmill and enjoy the security of homeownership. It does, though, reward a long-term mindset, treating a property as a home to build memories in rather than a short-term investment. As with any 100% mortgage, it is important to understand the potential risks and drawbacks before deciding.
Product terms, rates and lending criteria change regularly, and a product can be withdrawn or amended at any time. Always confirm the current availability and details of any 100% mortgage with an adviser before relying on them.
A 100% mortgage, also referred to as a no-deposit mortgage, is a loan that covers the full cost of a property purchase without requiring an upfront deposit from the borrower.
While this means you do not need savings or equity for a deposit to be eligible, it is still wise to have funds available for the general costs of buying. These include Stamp Duty (if applicable), valuation, legal and moving fees, as well as the money needed to furnish your new home.
We also recommend setting aside a rainy-day fund equivalent to around three months' worth of monthly mortgage payments, so you have a buffer if circumstances change.
On a typical mortgage, the borrower provides a deposit of between 5% and 20% of the property's value as security for the lender. This reduces the lender's risk, and generally the larger the deposit, the cheaper the interest rate you can access. Our guide to how much you can borrow explains how deposit, income and circumstances feed into the figure.
With a 100% mortgage there is no upfront deposit. Instead, the lender finances the full purchase price of the property, and you are responsible for repaying the entire loan amount over the term of the mortgage.
The headline advantage is clear: you do not need a deposit to buy a home. Depending on the product, you may instead need a family member with funds available to act as a guarantor.
It is important to remember that you will still be responsible for covering the various fees associated with buying a property, so a no-deposit mortgage does not mean a cost-free purchase.
There are some drawbacks to 100% mortgages, and it is important to consider your individual circumstances for each application:
If you are buying your first home, it is worth reading these points alongside our first-time buyer mortgage guide, which walks through the whole process and the support available.
Our team of specialists is here to help and to recommend a suitable product for your circumstances. That may be a 100% mortgage, but there may be other alternatives worth exploring, and we will talk those through with you so you can make a confident decision.
For more information, you can speak to us on 01322 553282 or get in touch online.
Speak to an adviser who will compare the whole market, explain whether a 100% mortgage fits your situation, and set out the alternatives.