Borrowing a mortgage deposit

Whether you’re paying sky-high rent, juggling childcare costs or simply trying to keep your head above water, putting away thousands for a deposit isn’t easy.

While many buyers aim for a 10% or 5% deposit to access a mortgage, not everyone has that kind of cash lying around – and some people may need help to get on the ladder sooner.

In this guide, we’ll look at different ways to get a mortgage even if you’re struggling to raise a deposit. We’ll also look at options like 100% mortgages that factor in your rent history, so you may not even need a deposit.

Why saving for a deposit can be so tough

Saving for a mortgage deposit can be challenging for many reasons, whether it’s rising house prices, the effect of the ‘cost of living crisis’ and individual circumstances. Rent, bills and debt repayments often consume most income, leaving little for savings. Unexpected expenses and inflation also reduce financial flexibility, making it harder to accumulate a substantial deposit over time.

Lots of people are finding it tough to save, including:

• Renters: With rent often as high as (or higher than) a mortgage payment, there may not be much left each month to put aside.

• People living at home: You might be saving on rent but still not earning enough to build up a deposit quickly.

• Single-income households: Saving on one salary while managing bills and living expenses can be really tough.

• People with debts or caring responsibilities: Existing financial commitments or time away from work can slow down your saving progress.

But whatever your situation, help may be available – and you might have more options than you think…

Low or no deposit mortgage options

Let’s start with what’s out there for those who haven’t managed to save much, or nothing at all:

• 100% mortgages: These are rare, but sometimes there will be at least one mortgage product that doesn’t require a deposit. Instead, the lender assesses your eligibility based on your history of rent payments. You’ll need to have rented for at least 12 months and meet affordability checks, but it could be a way onto the ladder without a cash lump sum.

• 5% or 10% deposit mortgages: These are more common and ideal for first time buyers. With a small deposit, you’ll typically still need to show good credit and affordability, but you might find a deal that works.

• Shared ownership: This is part buy, part rent. You purchase a share of a property (usually between 10% and 75%) and pay rent on the rest. Because you’re buying a smaller share, your deposit might be a lot lower. Read more about the Shared Ownership scheme here.

• First Homes scheme: A government initiative offering eligible first-time buyers a discount of at least 30% on new-build homes. A smaller purchase price means a smaller deposit. Read more about the First Homes Scheme here.

Options for getting help with your deposit

If you don’t qualify for a no-deposit mortgage, you might be thinking about borrowing a deposit to access a 95% or 90% mortgage deal. This isn’t always straightforward – lenders want to make sure the deposit is genuinely yours – but some may allow it in certain circumstances.

There are a few routes you might consider to borrow money for your deposit, and some alternatives. Some may be more realistic than others depending on your circumstances.

Loan from family

It’s quite normal for parents to want to help their kids get a foot on the property ladder. If that means lending them the money, lenders will usually want to see a formal agreement that sets out repayment terms.

Bear in mind that some lenders might not accept family loans. For those that do, they’ll likely count it as a commitment in your affordability checks.

Alternatively, a family member (usually a parent or grandparent) gives you the deposit money as a gift with no expectation of being paid back. Most lenders are happy with this as long as it’s clearly a gift and not a loan. The person giving you the money will usually need to sign a letter confirming this.

Family assist or springboard mortgages

These let you borrow up to 100% of the property’s value with a helping hand from your family. Instead of giving you money, your relatives pop it into a linked savings account with the lender (where it earns interest) or agree to a charge being placed on their own home. If you miss repayments, their savings – or even their home – could be at risk, so it’s important everyone understands the risks.

Guarantor mortgages

Rather than lending or gifting a deposit, a family member guarantees your mortgage repayments. This can help if you have a small or no deposit, as the guarantor’s income or savings give the lender extra confidence. If you miss repayments, the guarantor is legally responsible for covering them – so it’s important they understand the risks.

Equity release or remortgaging

If your parents are homeowners, they might be able to remortgage or take out an equity release plan on their property to raise money for your deposit. If they gift the funds, most lenders will treat this the same as a standard gifted deposit. But if they expect you to pay it back, a written agreement is key – just like with a family loan.

Personal loan

Borrowing a deposit through an unsecured loan is risky. Most lenders won’t accept this as a valid deposit source, and it could reduce the amount you’re able to borrow on your mortgage. You’d also need to keep up with loan repayments on top of your mortgage.

Secured loan

In rare cases, someone may use a secured loan (against another asset) to raise a deposit. Again, most lenders won’t accept this, but it may be possible with specialist lenders.

Joint borrower, sole proprietor mortgages

A family member joins the mortgage application to boost your affordability, but doesn’t go on the deeds. This can help you qualify for a higher loan without needing as big a deposit.

Lifetime ISA

If you’re aged 18 to 39, a Lifetime ISA (LISA) could help you build up a deposit faster – with a 25% government bonus on top of what you save.

You can save up to £4,000 each tax year into a LISA, and the government will add a 25% bonus (up to £1,000 per year). You can use the funds – including the bonus – towards buying your first home, as long as:

• The property costs £450,000 or less.

• You’ve had the LISA open for at least 12 months.

• You’re using a repayment mortgage.

LISAs can be opened as a cash ISA (earning interest) or a stocks and shares ISA (which can grow more but carries risk). Either way, it’s free money from the government if you’re saving for your first home – and can make a big difference to your deposit total.

Just bear in mind that withdrawing the money for anything other than a first home (or retirement after age 60) means losing the bonus and paying a penalty.

Things to think about

Getting on the property ladder without a big deposit is tough – but not impossible. Whether you’ve been stuck in the rent trap or simply haven’t had the chance to save, there may be ways to buy with a low or even no deposit.

Before making any decisions, it’s worth checking your credit score, working out your budget, and comparing what different lenders offer. Some options – like shared ownership or the First Homes Scheme – can be a good stepping stone, while others like 100% mortgages might work if you’ve been reliably paying rent.

Just make sure any borrowed deposit is fully disclosed to the lender – and be clear on the risks and responsibilities involved.

Buying your first home is a big commitment, but with the right approach, you could get there sooner than you think.