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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 4th May 2021*

Thanks to government schemes, a resilient property market and specialist mortgage products, 95% loan-to-value (LTV) lending is firmly back on the agenda, and in this guide, we take a look at the 5% deposit and 95% LTV mortgage options for second-time buyers.

In this article…

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Are 95% LTV mortgages available for second-time buyers?

Second-time buyers with only 5% deposit to put down might actually find their mortgage options more limited than first-time buyers. This is because some 95% LTV mortgage products are exclusive to first-time buyers, as is the latest phase of the Help to Buy scheme.

That isn’t to say there are no borrowing options for second-time buyers or home-movers with modest deposits. The 2021 mortgage guarantee scheme is open to anyone and eligible customers can get approved with anywhere between 5% and 9% deposit. There are also mortgage lenders who’ve reintroduced 95% LTV products and made them available outside of the scheme. Some of these products can only be accessed through a mortgage broker.

Aside from these two options, there could be fall-backs to consider. For instance, some guarantor mortgages are available to second-time buyers, so if you have a family member who is happy to support you financially, this could help lower the risk posed by your small deposit and increase the number of lenders who will consider your application.

Are mortgage interest rates the same for second-time buyers?

Yes, the interest rate you’ll pay on a 5% deposit mortgage won’t be directly impacted by your status as a second-time buyer. The only variable to consider is that some low-rate products might be unavailable to you, since Help to Buy is now exclusive to first-time buyers, and the same can be said of some of the 95% LTV products launched post-COVID.

Whether you’re a first-time buyer or a home-mover, 95% LTV mortgages tend to have some of the highest rates around. As a general rule, they can be around one percentage point higher than equivalent mortgage products with 90% loan-to-value ratios.

Needless to say, the best rates on the market can be difficult to come by if you only have 5% deposit, but bear in mind that getting a favourable deal is still possible. There are mortgage brokers who specialise in arranging low-deposit mortgages for home-movers, and they know exactly which lenders are best placed to offer them with the lowest rates available.

If you were to head out into the market without professional advice, the chances of rejection or having to settle for an unfavourable deal are high, so using a broker really is a no-brainer – they could save you time, money and potential disappointment!

Are 5% deposit mortgages more difficult to get?

For second-time buyers and home-movers, this is true to an extent. With Help to Buy equity loans and some 95% LTV mortgage deals being reserved for first-time buyers, your choice of products and approachable lenders might be restricted by your modest deposit amount.

But favourable rates and deals are out there, if you know where to look. You’d need to find a lender who understands the needs of home-movers and customers with limited deposit amounts, as this will increase your chances of landing a low interest rate.

It could well be the case that the perfect lender for you is one you’ve never heard of, one you won’t find on the high street or through a quick Google search. This is why speaking to a mortgage broker before you apply can pay dividends. The advisors in our network have access to every lender on the marker and deep working relationships with mortgage providers who specialise in second-time buyers with small deposits.

This means that they’re best place to help you find the right lender, first time, but that isn’t the only benefit to using a mortgage broker. They can also give you bespoke advice about your mortgage options and guide you through the application process from start to finish.

Eligibility requirements for second-time buyers

There are no specific eligibility requirements on 95% LTV or 5% deposit mortgages for second-time buyers compared to other types of borrower. But if you’re using the mortgage guarantee scheme, there are a few caveats to keep in mind…

  • The scheme cannot be used to buy a home worth over £600,000
  • The property must be a primary residence
  • The applicant must be an individual(s), not a company
  • Only repayment mortgages are available

Your other options as a second-time buyer would largely be restricted to the new 95% LTV mortgages that have been reintroduced to the market since COVID-19. Not all of them are available to home-movers and some can only be accessed through a mortgage broker.

With regard to the 95% LTV products that are available to you, your mortgage application would be assessed in line with the lender’s general eligibility criteria. In other words, they will want to establish your creditworthiness based on factors including your income, credit history, your outgoings and other variables. You can read more about how mortgage eligibility is assessed in our complete guide to mortgage applications.

Will it make any difference if I have bad credit?

Yes, in the sense that your options are likely to be even thinner on the ground, depending on the type of bad credit you have. Since your mortgage options might already be limited by your low deposit, seeking advice from a mortgage broker who is experienced in arranging bad credit mortgages is highly recommended.

As a home-mover with only 5% deposit, you’re ineligible for some of the schemes and specialist products that could help you get a low deposit mortgage, and your bad credit will only drive the risk of rejection or unfavourable rates up even further.

Some mortgage lenders will turn down a second-time buyer with bad credit outright, even if your credit issues are considered moderate in the grand scheme of things, but there are specialist lenders who have the flexibility to take the age, severity and reason for your adverse credit into account before making a final decision about your application.

The good news, however, is that the right mortgage broker could help you find a lender who is best placed to offer a good deal for customers who tick all three boxes: bad credit, second-time buyer and 5% deposit. Your circumstances might be somewhat niche, but that’s exactly what the mortgage brokers we work with specialise in!

Speak to a mortgage broker

If you’re a second-time buyer or home-mover who’s looking for a 95% LTV mortgage, your best bet is to speak to a mortgage broker. Since many 5% mortgage deals are limited to first-time buyers, you might struggle to find a willing lender with that amount of deposit, and even if you do get approved, you could end up paying over the odds in interest.

Not only can a broker make sure you’re matched with a lender who caters for second-steppers, a mortgage advisor with the right knowledge and expertise can make sure you end up with the best rates on the market and guide you through your application.

We’ve made it our mission to make sure everyone gets the right advice. To do this, we launched a free-broker matching service that can pair you up with the perfect advisor for your needs and circumstances, in this case, someone we’ve handpicked because they have a track record of helping people exactly like you and securing them the finance they need.

Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation between you and a broker who specialises in 95% mortgages for second-time buyers today.

Updated: 4th May 2021
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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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