Zero-deposit mortgages, which allow buyers to borrow the full purchase price without a down payment, can end up costing significantly more over time, according to analysis by estate agent Benham and Reeves.
For a typical £471,687 starter home in London, monthly repayments on a zero-deposit mortgage would be £3,331, compared to £2,226 with a 15% deposit of £70,753 – a difference of £1,105 per month. Over the first five years, interest payments on the zero-deposit option total £158,104, versus £84,834 with a deposit, meaning an extra £73,270 in interest.
How zero-deposit mortgages work
Metro Bank recently launched a zero-deposit mortgage with a loan-to-value ratio of up to 100%. The product is a Joint Borrower Sole Proprietor (JBSP) mortgage, requiring between one and four immediate family members to apply alongside the buyer. While the family members' income is used in the affordability assessment, the buyer owns the home. However, joint borrowers are liable if payments are missed, affecting their credit history.
The mortgage is available for homes worth up to £675,000, with a maximum term of 35 years and a five-year fixed rate of 6.99%. It is not available for new builds or properties above commercial premises. No product or valuation fee is charged, and borrowers receive specialist mortgage advice before applying.
Expert caution
Marc von Grundherr, director of Benham and Reeves, said: ‘For many aspiring buyers, saving a deposit remains the single biggest barrier to homeownership and products such as a 100% mortgage undoubtedly provide an important route onto the property ladder.’
He added: ‘That said, where circumstances allow, taking a little longer to build a deposit can still make a significant financial difference over the life of the mortgage, reducing monthly repayments, lowering interest costs and helping buyers build equity at a much faster rate.’
Von Grundherr emphasised the need to weigh the longer-term cost of borrowing the full value, as there can be a substantial difference in both monthly repayments and interest paid over the first few years. He noted that such products are not necessarily a bad idea, as they provide a realistic opportunity for many to purchase a home.
Equity differences
Going without a deposit also means slower equity building. After five years, a zero-deposit borrower would still owe £429,945, compared to £352,193 for someone with a 15% deposit – a difference of £78,000.
The analysis comes against a backdrop where saving a deposit remains challenging. A 2026 Barclays study found 39% of homeowners received financial help from parents for their first home, with the average first-time buyer deposit now at £61,090.
