Are you wondering if there is a possibility where you can buy a home without a deposit? Are you dreaming of owning a home in the United Kingdom without worrying about the required deposit amount? Then, you can search for properties on a uk real estate website that can help you search for a property with their listings and flexible rates and terms in the UK.
If you search for a home that does not require a deposit, you need to know the associated benefits and risks. It also assists you in the different alternatives that might apply to you. It gives you a heads up on making an informed decision for your future.
Can You Get a Home Without a Deposit
In the UK, you can get a loan with only a 100% of your home purchase price as long as you comply with the lender’s conditions. One of them is having a guarantor for your home loan. Note that this is a case-to-case basis depending on the demands of the lender. Given that circumstances, not all lenders set up criteria to meet. Instead, they require a minimum deposit following the loan-to-value of 95%. You need to prove that you have a reliable source of income, as well as a good credit score. And it mainly makes sense because you need to have at least a 5% deposit of the purchase price, and settle the lender’s mortgage insurance.
Know that even if you are not obliged to deposit for your home loan, there will always be an upfront cost that you need to settle for buying a home. You need to have a specific budget for the legal fees, stamp duty, and even building inspections. And if your concern is the idea of getting a no deposit home loan – that is possible, but it can serve as a double-edged sword. It may not be the best for all borrowers, and risks might arise. You need to be aware of this before getting the loan.
What are the Criteria for No Deposit Loans
Lenders strictly look for applications regarding home loans, especially if they weigh for the risks that they might encounter along the way. So, here are the requirements that you must know for the no-deposit borrowers:
- High Credit Score: To get a home loan, you need to have a high credit score with different reporting agencies like Experian, Equifax, or Illion.
- Good Repayment History: One way to prove that you are a good payer is your repayment history. It helps you build your reputation as a payer, minimizing any doubt on the lender’s part. It is required to make sure that you pay all your current debt on time, like rent, personal loans, and credit cards.
- Stable Income: If you are planning to avail a no-deposit loan for your home, then you probably need a stable, reliable, and ongoing job that is high enough to ensure your capability in paying your debt. It will also reflect your ability to pay your loans on time.
What are the Options That you Can Avail for No-Deposit Home Loan?
There are a variety of options to choose from when it comes to a no-deposit home loan. Here are the things that you can consider:
Guarantor
One way to get a home loan without a deposit is asking someone or a member of your family to be your guarantor or co-sign your home loan. Most lenders allow borrowers to have 100% of the property value if they provided a guarantor, especially your parents. Using your parents as guarantors is not something you can take lightly. Having parents as guarantors is not a light matter because, with your parents as guarantors, they need to provide documents ensuring that they have all the means to repay the loan if you missed a repayment. It also means that they will be held responsible for your dues. Your guarantor plays an essential role in your home loan. It would be best if you have someone who can assist and help you.
First Home Owners Grant
Residents in the UK who are buying their homes for the first time have the chance to get a First Home Owners Grant from the government. Buyers are qualified if it is their first time buying a home property and did not have any freehold or even leasehold for a residential property. These are some of the requirements you need to meet to qualify for a first homeowners grant.
First Home Loan Deposit Scheme
The “first home loan deposit” scheme helps first-time homebuyers to make a loan with a minimum deposit of 5%. In this process, the government assists you in getting your first home by serving as your guarantor. However, the First home Loan Deposit Scheme is only limited to the first 10,000 first home buyer applicants every year. It is also limited for people with an income cap of $125,000 annually.
Are No Deposit Home Loans a Good Idea?
There will always be pros and cons in every situation, especially when it comes to your loans. You will have your reasons why getting a no deposit loan is essential, and there is also some reason that prevents you.
Here are some of the benefits and risks that might arise from no deposit loans:
Potential Benefits
- Having a home loan with no deposit allows you to have some savings in buying a property that might seem unaffordable. It helps you manage your financial basket well and balance all your finances.
- It is a good investment. Some home property increases its value over time, so it means having a home loan with no deposit allows you to save money as well as time in building up your property.
Potential Risks
- Lenders might charge higher interest rates than usual. It also means that the higher the amount you borrow, the higher the interest rate homeowners.
- The approval process for your no deposit home loan is long and tiring. The lenders will need to check your capability to pay homebuyers and minimize the risks on the lender’s part.
- Borrowing the total purchase price of the property might be risky. For example, if the property dropped its value, you are paying more than it’s worth. You will end up having a huge debt.
- It puts you under financial pressure.