A no-deposit mortgage loan: fact or fiction?

Buying your own home outright without a mortgage loan is only for the happy few. But how easy is it take out a mortgage loan with a bank? A yes or no from your bank depends on several factors. One major factors is how much you can put down as a deposit. How important is the size of your deposit in 2024?

Inextricably linked: your mortgage loan and your deposit

A mortgage loan is a loan you take out to build, buy or renovate a property, for example a house or apartment.

Your deposit is the amount you have saved to invest in your future home. You use this amount to cover as much of the home's purchase price as possible and the extra costs, such as stamp duty, notary fees and administrative fees (see below).

The higher your deposit, the more likely you are to receive a mortgage loan. This is because it reassures the bank that you have significant financial resources. The bank will therefore see you as less of a financial risk. To put it in banking terms, it demonstrates your repayment capacity.

In short, a significant deposit gives the bank more confidence in you.

A bank may take several factors into account when granting or refusing a mortgage loan. The possible renovation cost is one example.

What deposit do you need for a mortgage loan?

Admittedly, there is no all-encompassing answer to this question, and there is no hard and fast rule. The National Bank of Belgium has stipulated that in principle, banks can now lend up to 90% of the purchase price of a home. This means you always need to put down a deposit of at least 10%. This is the case for dwellings you intend to use as your own home. If you are borrowing 350,000 euros, you would therefore have to put down 35,000 euros. However, you may be required to pay a 20% deposit – or 70,000 euros in this case. This is a huge difference that really restricts your options. General speaking, 20% is the minimum deposit you need to put down for a buy-to-let property, for example.

So is getting a 100% mortgage from a bank impossible? Not quite, but since the National Bank of Belgium imposed stricter conditions in 2020, your chances of getting such a mortgage are far slimmer. Everything depends on the bank’s policy and the financial guarantees you can provide. The less risk the bank has to take, the more flexible its approach to the borrower will be.

So what makes the bank say yes or no?

A major factor for the bank's decision-making on the required deposit is the type of project you wish to invest in. What type of investments deter banks?

• Homes with a higher than average price tag
• The construction of an entirely new home
• Major renovation work: do you have to achieve a mandatory energy rating and can you pay for the work on top of the home's purchase price?
• Investment properties that are generally considered as higher risk

So: both the estimated cost of your housing project and any risks associated with your investment are decisive factors for the bank.

• The bank may also take into account a number of other aspects in terms of your repayment capacity, which will also indirectly affect the deposit you need to pay:
• What are your monthly earnings from your job?
• To what extent can you guarantee a monthly professional income in the long term?
• Do you have any current debts or have you had any in the past?
• Is this the very first home you are buying?
• Can your parents help out financially?
• Is your property in need of extensive renovation by a certain deadline and how much could this end up costing?

Don't forget the following costs

Buying or building a home involves many costs other than the home's actual purchase price. These include stamp duty, notary fees and the bank's administrative fees. Together, these can amount to (tens of) thousands of euros.

It is unlikely that the bank will cover these costs with its mortgage loan. In other words, you need to pay them using your own funds.

Is it still possible to take out a no-deposit loan?

In the past banks often made it possible to borrow up to 100% of the purchase price of your future home – sometimes even more – but today this is far from a given.

If the bank does grant such a mortgage loan, it is usually associated with higher interest rates or stricter conditions to minimise the bank's risks.

The bank decides, but …

Please note that banks will always carry out a risk assessment and the option of a zero or minimal deposit mortgage depends heavily on your individual circumstances and the current market conditions.

Of course, you can get in touch with several banks. This offers you multiple options and gives you some leverage to try and negotiate better conditions than you would have had at the beginning of your search.

Important: make sure you weigh up all your options properly. For example, one bank may offer you a lower interest rate, but it may require you to take out additional insurance in return. This may mean that you eventually end up paying more than you thought you would.

If you are considering taking out a mortgage loan, it is important to look at your lifestyle and long-term plans as well as the figures.

Think of tomorrow ... and of the day after tomorrow as well

The path to a mortgage loan is now more complex than, say, ten or twenty years ago. However, with the right preparation – reading this blog puts you well on your way – and a bank that keeps an eye on your long-term plans with you, you can move forward in the best possible way.

If you are considering taking out a mortgage loan, it is important to look at your lifestyle and long-term plans as well as the figures. As with any investment, it is important to obtain a clear picture of your financial situation and risk appetite.

You should therefore spend some time on finding the perfect approach to your mortgage loan. Building a stable and secure financial foundation for your future home is very important. Your future self will thank you for it.

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Keytrade Bank also offers interesting mortgage loans. What type of loan can we offer you for your home, construction or renovation project? Use the Keyhome calculator and find out now.

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