Thinking about buying a home but only have a 5% deposit? You’re not alone! At Mortgage Bridge, we know that saving for a deposit can feel like a huge hurdle, but getting a mortgage with just 5% down is totally possible. These mortgages—known as 95% loan-to-value (LTV) mortgages—help buyers get on the property ladder sooner rather than later. While a bigger deposit can land you better interest rates, a 5% deposit mortgage is still a great option if you’re eager to buy.
Interest rates may have shifted in recent years, but lenders are still offering 95% LTV mortgages to eligible buyers. So, let’s break down how they work, what you need to qualify, and how to boost your chances of approval.
1. What Exactly Is a 95% LTV Mortgage and How Does It Work?
A 95% LTV mortgage means that your lender covers 95% of the property price, leaving you to put down just 5%. This setup makes homeownership possible with a smaller upfront cost, but because lenders take on more risk, they tend to be stricter with who they approve.
1.1 How Does a 95% LTV Mortgage Work?
- You provide a 5% deposit.
- The lender funds the remaining 95% of the property’s value.
- Your monthly repayments are based on a fixed or variable interest rate.
- Higher LTV mortgages often mean higher interest rates.
1.2 Which Lenders Offer 95% Mortgages?
Many mainstream banks and specialist lenders offer these mortgages, but their criteria can vary. If you’re looking for the best mortgage lenders for a 5% deposit, a mortgage broker (like us!) can help you find the right match.
2. Can You Get a 5% Deposit Mortgage? Here’s What You Need
Lenders don’t just hand out mortgages—they assess your financial situation carefully. Here’s what they look at:
2.1 What Credit Score Do You Need?
Your credit score plays a big role in getting approved. The higher your score, the better your chances (and the better your interest rates). Lenders will check:
- Your history of paying back credit cards, loans, and other debts.
- If you’ve missed payments or have defaults, CCJs, or bankruptcies.
- How much debt you currently have.
2.2 How Does Your Income Affect Mortgage Approval?
Having a stable income is key. If you’re employed, lenders will look at your payslips. If you’re self-employed, you may need:
- Two to three years of tax returns.
- Bank statements showing steady income.
- Proof of ongoing work or contracts.
2.3 How Do Lenders Work Out Affordability?
Lenders don’t just look at what you earn—they also check your spending. They’ll assess:
- Your income versus your monthly expenses.
- Existing debts, like loans and credit cards.
- Whether you can still afford repayments if interest rates rise.
3. What Are the Challenges of a 5% Deposit Mortgage?
A 5% deposit mortgage can be a great way to buy a home sooner, but there are some things to consider.
3.1 Why Are Interest Rates Higher?
Lenders take on more risk with a smaller deposit, which often means higher interest rates. That’s why it’s important to compare mortgage options with a small deposit before making a decision.
3.2 What Is Negative Equity and Why Does It Matter?
With a small deposit, there’s a higher risk of ending up in negative equity—this is when your home’s value drops below what you owe. If you plan to move or remortgage soon, this could be a problem.
3.3 Are There Extra Fees?
Some lenders charge higher arrangement fees for 95% LTV mortgages, and you may also need mortgage indemnity insurance.
4. How Can You Boost Your Chances of Approval?
If you’re worried about qualifying, here are some ways to strengthen your application:
4.1 How Can You Improve Your Credit Score?
- Pay bills on time—especially credit cards and loans.
- Avoid using too much of your available credit.
- Check your credit report for mistakes and get them fixed.
4.2 How Can You Increase Your Mortgage Affordability?
- Reduce existing debts before applying.
- Cut unnecessary spending (lenders look at your outgoings!).
4.3 Can a Guarantor Help?
If your income isn’t quite enough, a guarantor mortgage could be an option. This is when a family member agrees to cover the payments if you can’t.
4.4 Should You Save a Bigger Deposit?
Saving even a little more—like 10% instead of 5%—can mean better mortgage deals and lower monthly payments.
5. Are There Government Schemes to Help?
Yes! If you’re struggling to buy with a small deposit, you might qualify for one of these schemes:
5.1 What Is the Help to Buy Equity Loan?
This scheme helps buyers boost their deposit by borrowing extra money from the government.
5.2 What Is Shared Ownership?
You buy part of a property and rent the rest, making homeownership more affordable.
5.3 How Does the First Homes Scheme Work?
Designed for first-time buyers and key workers, this scheme offers discounts on new-build properties.
6. What’s the Process of Applying for a 5% Deposit Mortgage?
- Check Your Finances – Review your credit score and savings.
- Speak to a Mortgage Broker – We can help you find the best mortgage lenders for a 5% deposit.
- Get an Agreement in Principle (AIP) – This gives you an idea of how much you can borrow.
- Find Your Dream Home – Make sure it meets lender requirements.
- Apply for a Mortgage – You’ll need proof of income, bank statements, and other documents.
- Valuation & Checks – The lender will assess the property and do background checks.
- Mortgage Offer – Once approved, you’ll receive a formal mortgage offer.
- Final Steps – Work with your solicitor to complete the purchase.
7. Can You Get a Mortgage with a 5% Deposit? Final Thoughts
Absolutely! If you’re asking can I get a mortgage with only 5% deposit?, the answer is yes—with the right preparation. At Mortgage Bridge, we specialize in helping buyers, including those with low deposits or bad credit, find the right mortgage. If you’re ready to explore your options, get in touch with us today—we’d love to help you get on the property ladder!