Can I Buy a House Without a Deposit in the UK?

Buying a house is a significant financial investment, and it should not be taken lightly. There are several things to consider before diving in, such as your income, employment status, credit score and, of course, how much money you have saved for a deposit.

In the UK, you must have a deposit to buy a house. A deposit is a sum of money you pay upfront when you enter a contract to buy a property. The deposit secures your interest in the property and is usually a percentage of the total purchase price. In the UK, the minimum required deposit is 5% of the total value of the property.

If you’re in the property market and don’t have a deposit saved, options are still available. You could consider:

Look into the Help to Buy Scheme

If you’re buying your first home, you may be able to get help with your deposit through a government Help to Buy scheme. With Help to Buy, the government will lend you up to 20% of the cost of your newly built home(40% in London) as an equity loan. You’ll only need a 5% deposit and a 75% mortgage to buy your home. The equity loan is interest-free for the first five years. It must be your primary residence, and you must be a first-time buyer to qualify.

Also See: Top Rated Cambridge Conveyancing Solicitors

Get a Guarantor Mortgage

A guarantor mortgage is when someone else agrees to be responsible for the mortgage repayments if you can’t make them. A guarantor could be a parent, grandparent, or close friend. They will need to have a good credit score and be able to afford the mortgage repayments themselves. You take the loan against their property or savings, which acts as collateral. Depending on the lender, this option can make it easier for you to get a mortgage with a smaller deposit or without a deposit. However, it puts your guarantor’s finances at risk if you can’t make the repayments.

Also See: Northampton Conveyancing Services

Consider a Shared ownership Property

Part buy rent—commonly referred to as—shared ownership, is an affordable homeownership where you purchase a share of a property and pay rent on the remaining unowned share. The minimum share you can purchase is usually 25% and the maximum is 75%. You will be a leaseholder with a long-term lease of the property, which gives you the same security as an owner occupier.

You’ll need a smaller deposit and mortgage than if you were buying the property outright. Your monthly payments will also be lower. Most mortgage brokers’ offer shared ownership loans without the need for a deposit. However, you will still need to save on the fees associated with buying a property, such as stamp duty, legal fees, and moving costs.

Related: How To Renegotiate A House Offer After Your Survey

Use a Gifted Deposit

If you have family members willing to help, you could ask them for a gifted deposit. This is when they give you the money for your deposit as a gift. You will need to prove to the mortgage lender that the funds are a genuine gift, not a loan you must repay. Gifted deposits are only an option if you have family members who are able and willing to help.

New Build Developer Loans

Some new build developers offer loans to help you pay a deposit if you buy one of their properties. This can be a good option if you’re struggling to save for a deposit or don’t have family members who can help. However, you will need to be aware of the risks involved, such as the property not being completed on time or to a high standard. These loans also tend to have high-interest rates, and you may need to pay back the loan in full if you sell the property within a certain time frame.

Conclusion

Buying a house is a big financial commitment, and there are things to consider before taking the plunge. By researching and exploring your options, you can find a way to buy a property with a smaller deposit or without a deposit. Talk to your mortgage company representatives to find out what’s best for your individual circumstances. A conveyancing solicitor can also help to guide you throughout the entire process and explain any legalities involved in buying a property.