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5% Deposit Mortgages in Scotland

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 20, 2021

Thanks to government schemes, specialist mortgage products and a resilient property market, 95% loan-to-value (LTV) and 5% deposit mortgage are back with a bang in Scotland. There are now several options for customers to choose from, and in this guide, we’ll explore each of them and tell you how to get the right advice before you apply.

Are 5% deposit mortgages available in Scotland?

Yes! Although 95% LTV and 5% deposit mortgages virtually disappeared from the Scottish market during the coronavirus pandemic, the situation has since changed. There are now several ways to get a mortgage with 5% deposit in Scotland, and they include…

If you’re unsure which of these options to choose, jump ahead to the next section to find out more about them, or better yet, make an enquiry with us so we can match you with a broker who specialises in low deposit mortgages in Scotland. They can go over each option with you and help you make an informed decision about which one is right for you.

How to get a mortgage with 5% deposit in Scotland

Before you apply, it’s a good idea to ready the documents you will need for your application and access your credit reports so you can make sure they’re fully accurate and up to date. You can find a full list of the documents you’ll need in our guide to mortgage applications and you can download your credit reports via our website, too.

Next, you should consider speaking to a mortgage broker before applying for an agreement in principle as they can offer you bespoke advice about which low-deposit option to choose. What’s more, they will make sure you’re paired with the right lender and negotiate the best deal available on your behalf. This could mean saving time, money and potential disappointment by boosting your chances of mortgage approval at the first time of asking.

Here are your main options if you’re applying for a mortgage in Scotland with 5% deposit…

The 2021 mortgage guarantee scheme

The mortgage guarantee scheme has introduced a range of new mortgage options for customers with 5% deposit, including five-year fixed-rate products. These mortgages are assessed based on the lender’s standard eligibility criteria and are open to first-time buyers and home-movers who are purchasing a primary residence valued at £600,000 or less.

Home-buyers in Scotland will have full access to the mortgage guarantee scheme as it has been rolled out across the UK. The only difference to take note of in Scotland is that mortgage providers only lend up to the purchase price or Home Report valuation, whichever is lower. So you may have extra budgeting to do if you’re bidding over the valuation.

You can read more about the mortgage guarantee scheme on our blog.

New 95% LTV mortgages

Since the government launched the guarantee scheme, a number of alternative lenders have announced their own 95% loan-to-value mortgage products that people can apply for outside of it. Many of them are available to borrowers in Scotland, and this is good news for anyone who might not fit the eligibility criteria at high street mortgage providers.

Some of these new 95% LTV mortgages are only available through mortgage brokers, so speaking to one before you apply will increase the number of deals available to you.

First Home Fund

The First Home Fund is an initiative from the Scottish government which provides equity loans for first-time buyers to help them get onto the property ladder. You’d need to put down 5% deposit and the government will add an interest-free loan of up to £25,000 to help you buy a property with more equity than a 5% deposit would normally get you.

There is no upper price cap on homes bought through the scheme and it can be used to purchase new builds or older properties. The equity loan is repayable when you come to sell the property. The amount you’ll repay to the government will depend on the percentage of your home’s original purchase price that was covered by the equity loan.

You can read more about the scheme in our guide to the First Home Fund.

Low-Cost Initiative for First Time Buyers (LIFT)

The Low-Cost Initiative for First Time Buyers (LIFT) scheme is aimed at prospective home-buyers in Scotland who cannot afford to purchase a property outright or won’t qualify for a standard residential mortgage.

Two types of LIFT agreements are available…

  • Open Market Shared Equity scheme: This allows first-time buyers to buy a 60% to 90% share of a property available on the open market with a low deposit.
  • New Supply Shared Equity scheme: Similar to the above but limited to new-build homes that can be bought with a 60-80% equity stake.

LIFT mortgages are usually reserved for social renters, members of the armed forces and disabled home-buyers in Scotland.

Guarantor mortgages

guarantor mortgage could be an option if you don’t qualify for a 5% deposit mortgage on your own and have a family member who’s willing to support you. This would involve them securing the mortgage against a property they own and hold enough equity in, or placing a certain amount of savings into an account held by the mortgage lender, as well as agreeing to take responsibility for the mortgage debt if you were ever unable to.

Guarantor mortgages are available to home-buyers in Scotland with modest deposits or even no deposit of their own, under the right circumstances. A relatively small number of lenders offer these products, so expert advice is recommended before you set out.

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Options for first-time buyers in Scotland

First-time buyers in Scotland actually have a wider range of 95% LTV mortgage options than everyone else. Not only is the mortgage guarantee scheme open to them, some of the new 95% LTV products that are available outside of it are first-time buyer exclusives. This also applies to some (but not all) guarantor mortgages and other government schemes.

The Low-Cost Initiative for First Time Buyers (LIFT) scheme and the First Home Fund are only available to first-time buyers, but are often considered fallback solutions for borrowers in Scotland who either can’t afford a regular 5% deposit mortgage or won’t qualify for one.

With a range of options to choose from, speaking to a mortgage broker who specialises in arranging low-deposit deals in Scotland is recommended. They can tell you whether it’s in your best interest to use a government scheme or explore alternatives, as well as make sure you find the right lender first time and complete all of your paperwork correctly.

Speak to an expert about 5% mortgages in Scotland

If you’re applying for a mortgage north of the border with only 5% deposit to put down, you might be feeling anxious about your prospects; but don’t be! The right mortgage broker can make sure that 5% deposit goes as far as possible by offering you bespoke advice, searching the entire market for the best deals, and pairing you up with the right lender.

We offer a free broker-matching service that can pick out the perfect mortgage advisor for you. This will be someone with the knowledge and expertise to boost your chances of mortgage approval and a track record helping low deposit customers in Scotland.

Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation chat between you and a broker who could help you save time and money today.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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