Getting a 5% Deposit Mortgage With Bad Credit

Find out how to secure the best rate with the help of a specialist bad credit mortgage broker.

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Home 95 Ltv Mortgages Getting A 5% Deposit Mortgage With Bad Credit

We’ll explain what your options are if you need a bad credit mortgage but only have a 5% deposit, what you can do to increase your chances of a successful application and why a specialist mortgage broker can be the difference between approval and rejection.

Can you get a 5% deposit mortgage with bad credit?

It’s not completely impossible but will be very difficult.

The success of any application, specifically where adverse credit is involved, will largely depend on:

  • The severity of your credit issues
  • How long ago they were
  • Whether they have now been resolved satisfactorily

Ultimately, mortgage applications are assessed against a lender’s criteria, with high-street banks tending to be stricter when it comes to risk factors like bad credit and low deposits. So, if you have both, the chances of getting the approval you need are diminished.

If you are successful this may mean your mortgage repayments are more than you expected as a result of higher interest rates imposed by the lender to cover their potential risk.

However, there are ways you could get a competitive deal, such as through government schemes or family support mortgages. A bad credit mortgage broker can talk you through these options.

Maximise your chance of approval with a specialist in bad credit mortgages

Get Started Phone Icon 0808 189 2301

How to get a bad credit mortgage with a 5% deposit

Your first step should be to speak to a bad credit mortgage broker who specialises in low-deposit mortgages. Make an enquiry and we will match you with an advisor with expertise in both of these niche areas.

Your mortgage specialist will guide you through the following steps:

  • Exploring all low deposit options: This will include any government schemes you might qualify for, family support options and specialist mortgage lenders who offer 95% LTV deals (5 % deposit).
  • Downloading your credit reports:  Your advisor can help you do this and suggest ways to optimise them. This is vitally important if you only have a small deposit, as it can increase the overall strength of your application.
  • Finding the right lender: Not all lenders offer 95% LTV mortgages, but the right mortgage broker can narrow down your search to the ones that do, and help you secure the best rates and deals through them.

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How approval is possible

The table below illustrates how likely you are to be approved based on the severity of the issue.

Please note that the likelihood is merely approximate and could change based on the deposit amount.

Bad Credit Factor Severity Likelihood of Approval with 5% Deposit
No credit history Not severe Possible
Low credit ratings Not severe Possible
Late payments Not severe Possible
Unauthorised overdraft charges Not severe Possible
Mortgage arrears Severe Unlikely
Defaults Severe Unlikely
County Court Judgement (CCJ) Severe Unlikely
Debt Management Plan (DMP Severe Very unlikely
Individual Voluntary Arrangement (IVA) Severe Not possible
Bankruptcy Very severe Not possible
Multiple credit issues Very severe Not possible
Repossession Very severe Not possible

If your credit issues are not severe (for example unauthorised overdraft usage, a few late payments on credit cards or arrears on unsecured credit), you may still be able to apply for a mortgage with a mainstream lender and get approved.

With multiple credit issues or more severe forms of adverse credit (such as mortgage arrears, CCJs, IVAs or bankruptcy) this will most likely not be possible.

You may need to wait until you have a higher deposit, and until enough time has passed for these events to have been removed from your credit report. With satisfied defaults or CCJs, you may still be able to get a mortgage but you will most likely need a higher deposit.

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Options for first-time buyers

There are several options potentially open to first-time buyers. For example, government schemes for 5% deposit mortgages might help.

These include:

  • Mortgage Guarantee Scheme: You need a minimum 5% deposit and the government guarantees a percentage of the mortgage. This is designed to encourage lenders to approve more 95% mortgages as it can help lessen their risk.
  • 95% Shared Ownership: Shared Ownership mortgages let you take out a mortgage to buy part of a home and pay rent to a housing association on the rest.
  • Guarantor mortgages: Friends or family members with sufficient equity or savings put up collateral. This can reduce your loan to value and offset the risks associated with your credit issues.

But it’s not just the government who can help first-time buyers in this scenario.

If you have family members who are willing and able to help you increase your deposit, other options are available:

  • Joint buyer sole proprietor (JBSP) mortgages: You can buy in conjunction with, for example, your parents while still being solely responsible for the repayments. This allows you to benefit from their equity and good credit rating.
  • Gifted deposits: Another way of increasing your deposit amount to offset lenders’ concerns regarding your credit history. It must be made abundantly clear that any monies are a gift and won’t need to be repaid.

What if you have no deposit to put down?

If you have family who can help you source a deposit, your situation is not really any different from having a 5% deposit. Although you will be asking them to put up more of their assets in lieu of your deposit.

With no deposit at all and a history of bad credit, your options are even more limited. In this case, it’s best to consider a savings plan so you can create the deposit funds you need whilst monitoring your credit records until your score improves sufficiently to a point where you can more confidently apply for a mortgage.

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Get matched with a specialist low-deposit mortgage broker

Getting a mortgage with a 5% deposit is not completely out of the question. Neither is getting a mortgage with bad credit. With both, your best bet is to speak to a broker who deals in low-deposit mortgages with bad credit day in, day out.

Our broker matching service is designed to assess your circumstances and then partner you with a mortgage advisor who specialises in helping people just like you to get the best deal available to them.

After a brief chat, we’ll identify the best broker for you and get the ball rolling. All the brokers we work with have whole of market access and will compare the whole UK mortgage market to get you the best deal possible.

To speak to your ideal mortgage broker call today on 0808 189 2301 or enquire online.

Maximise your chance of approval with a specialist in bad credit mortgages

Get Started Phone Icon 0808 189 2301


Typically, the bankruptcy must have been discharged for at least three years before you can get accepted for any type of mortgage.

Both can have advantages if you are applying for a mortgage as settling your debt will improve your debt-to-income ratio, which means you might be able to borrow more.

Putting down more deposit, however, could improve your loan-to-value ratio and increase your chances of securing a good deal.

This is a question to ask a mortgage broker as they can offer additional context about how each option and how it will increase the number of lenders, rates and deals available to you.

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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 Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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