Deposit free mortgages for first time buyers and bad credit

Deposit free mortgages are often referred to as 100% mortgages. They're especially good for people who can't save up enough money for a deposit, or people who want to buy a house immediately and won't have time to build up a large sum of money.

However, deposit free mortgages often have higher interest rates or inflexible terms compared to other mortgage products. The deposit for most mortgages is designed to help you reduce the amounts you pay but also acts as a form of security for the lender; if you don't pay a deposit there is more chance of you being unable to afford the mortgage, and therefore more chance of you defaulting. So, in most circumstances, you'll need an excellent credit rating and a specialist 100% mortgage provider to find the best deal.

You should try to explore other market options, such as products that offer a lower deposit (i.e., 10% mortgage or let to buy homes) before considering a deposit free mortgage. Think about why you need a no deposit mortgage.

  • Are you struggling to build up a deposit after expenses when you receive your income? If this is the case you need to think about whether you can actually afford to pay mortgage repayments every month.
  • Do you have a bad credit rating and can't find an alternative loan to act as a deposit? If this is the case then you really need to consider how much you can afford each month; a bad credit rating will result in higher interest rates and a higher monthly payment for your mortgage.
  • Can you manage your money well even though you can't build up a large deposit? Some no deposit mortgages may have variable rates, or uncapped monthly payments, which could result in higher payments per month. You need to make sure you're prepared for any price increase.

If you can't build up a deposit at the amount and are not sure if you can afford to pay for a mortgage on your income you should consider other alternatives, like renting a cheaper home for the time being and saving up for a deposit. Some deposits with different providers will be considerably lower than other mainstream lenders.

However, if you're sure you want a deposit free mortgage but can't seem to find a lender, try building societies such as Skipton, Yorkshire Building Society or Nationwide, who are more likely to favourable low deposit mortgage rates than high street banks.

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