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A Guide To 95% Loan-To-Value Mortgages

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 24, 2021

Countless people have had their homeownership dreams dashed because a mortgage lender has told them you can’t get onto the property ladder without at least 10% deposit. But if you happen to be one of them, we’ve got some good news: it’s absolutely possible to get a mortgage on a residential property with just 5% deposit, if you know where to turn to get the right advice.

That’s where we come in! We’ve put together this guide to 95% loan-to-value (LTV) mortgages so you can learn everything you need to know about them, including how they work, how to go about applying for one and where to find a broker who can improve your chances of approval.

Plus in our FAQ section, we’ve answered the questions we hear most often about 95 percent deposit mortgages.

What does ‘95% LTV mortgage’ mean?

A 95% LTV mortgage is a mortgage with a loan-to-value ratio of 95 percent. For anyone unfamiliar with the property industry lingo, the loan-to-value ratio refers to the amount of finance you’ve taken out compared to the value of the property it’s secured against, expressed as a percentage.

So, if you were to take out a mortgage with a 95% loan-to-value ratio, you would need to put down 5% deposit. Here’s an example to put that into context: if you bought a property for £100,000 using a £95,000 mortgage and a £5,000 deposit, the mortgage product’s LTV would be 95%.

One thing you should keep in mind is that not all 5% deposit mortgages come with 95% LTV. If you were applying through the Help to Buy scheme or with a guarantor supporting you, for example, you might end up with more equity in addition to the 5% your deposit gets you.

How does a 95% LTV mortgage work?

The mortgage loan itself doesn’t work any differently to any other kind of mortgage, though the eligibility criteria might be more stringent since lending to a borrower who only has a small deposit to put down often means that the mortgage provider is taking on extra risk.

The application process might also be somewhat different for a 5% deposit mortgage, depending on how you’re applying for one. Although there are mortgage lenders who offer them outright, many 95% LTV mortgages are arranged through schemes like Help to Buy and Shared Ownership, as well as specialist product categories such as family assist mortgages, which may involve extra paperwork.

Did the 95% LTV mortgages disappear during the coronavirus pandemic?

Not quite. Due to market uncertainty and the Bank of England’s decision to drop interest rates to an historic low in March 2020, most UK mortgage providers withdrew 95% mortgages from their product range. Lending to customers with small deposits was considered too risky in the current climate.

This applied to most, but not all mortgage lenders. A small minority of mortgage providers continued to offer 5% deposit mortgages, though the majority of these were through schemes like Shared Ownership or family assist mortgages, as we’ve already mentioned.

As part of its Spring 2021 Budget, the government announced the mortgage guarantee scheme to encourage lenders to reintroduce 5% deposit mortgages and make them readily available again. The initiative – which sees the government share the risk on 95% LTV deals by guaranteeing a portion of the loan on homes worth up to £600,000 – will benefit first-time buyers and homemovers alike.

At launch, five UK mortgage lenders are offering 5% deposit mortgages under the guarantee scheme with one more set to join the fold at a later date. And since the scheme was announced, other lenders have reintroduced 95% LTV products and made them available outside of it.

So there are signs that 95% LTV lending is gradually returning, but given that options are still limited, speaking to a broker who specialises in low-deposit mortgages is recommended before you start out. Not only will talking to them boost your chances of approval, their expert advice could help you save time, money and unnecessary marks on your credit report in the grand scheme of things.

Are 95% LTV mortgages still available today?

Yes. You can still get a 95% mortgage today, despite the majority of these products being pulled from the market during the peak of the coronavirus pandemic. A small number of lenders continued to offer them under niche circumstances and new 95% LTV mortgage products have since emerged.

Here are all the ways you can currently get 5% deposit mortgages in the UK…

  • Through the 2021 mortgage guarantee scheme
  • The Help to Buy scheme
  • Shared Ownership
  • Family assist mortgages
  • New 95% LTV mortgages outside of the guarantee scheme

If you’re unsure which of the above options is right for you, make an enquiry with us and we’ll match you with a broker whose specialty is arranging low-deposit mortgages. They can go over each of these options with you and help you choose the right one for your needs and circumstances.

Alternatively, jump ahead to the next section to find out what the requirements for a 5% deposit mortgage are through each of these channels and how to go about applying for one.

How to get a 5% deposit mortgage

The process you will need to go through and the exact requirements may vary depending on how you’re applying for a 5% deposit mortgage. In this section, we’ve detailed the main ways to get a mortgage with this deposit amount and the implications of applying through that channel.

Before you start out, you can prepare for your application by taking the following steps…

  • Gather the necessary documents: You’ll need official documents to prove your identity, address, deposit funds and your income. Having them ready in advance could save you a lot of time when you begin the mortgage application process. A full list of the documents you’ll need can be found in our complete guide to mortgage applications.
  • Download your credit reports: This is especially important if you’re applying for a 5% deposit mortgage because you’ll need your credit file to be in the best possible shape. Downloading your reports in advance will give you the chance to challenge inaccuracies, have any outdated information removed and prepare for any issues you might face later on.
  • Speak to a mortgage broker: This step is highly recommended due to how difficult it’s been getting a 5% deposit mortgage of late. A broker who specialises in low-deposit lending can go through every possible option with you and dramatically improve your chances of mortgage approval. They can help you lock down the best rates and complete the paperwork, too.

If you use a mortgage broker, they will help you prepare for your application, ready your documents and optimise your credit report. The next step after this would be applying for a 95% mortgage in principle. This is a preliminary agreement from a lender which will tell you how much they’d potentially let you borrow and under what terms and conditions. Not all lenders offer agreements in principle, as some choose to skip this step and move straight to full application.

Getting a 5% deposit mortgage through the guarantee scheme

The requirements for a 95% LTV mortgage through the mortgage guarantee scheme are as follows…

  • A minimum of 5% deposit to put down (can go up to 9% if you have that much)
  • Buying a property worth £600,000 or less
  • Buying a primary residence (buy-to-lets and second homes not covered)
  • Applicants must be an individual or individuals, not a company
  • Limited to repayment mortgages only (interest-only not included)
  • Available to first-time buyers and home-movers

At the time of writing, five high street lenders are offering 5% deposit mortgages under the scheme and another is set to support it in the near future. Rates, eligibility criteria and product types vary from one to the next, although all of them have a five-year fixed-rate deal in their range.

Using a broker is recommended if you’re applying for a mortgage through the guarantee scheme. Not only can they match you with the lender whose criteria you’re the closest fit for, they can go through every alternative with you, so you can rest assured that you’re making the right decision.

Using a Help to Buy equity loan

It’s possible to get a mortgage with 5% deposit through the Help to Buy scheme. This works differently to the guarantee scheme, as the government will let you borrow 20% of the property’s purchase price interest-free for five years (40% if you live in London). Help to Buy has been extended to 2023, but with extra terms and conditions in place. The requirements are now as follows…

  • 5% deposit (the government loan adds at least 20% of the purchase price to this)
  • The scheme is now limited to first-time buyers
  • For buying new-build primary residences only
  • Regional price caps are now in place (see the Help to Buy website for details)

By using a Help to Buy equity loan, you could potentially get on the property ladder with 5% deposit, but you’d have a lower loan-to-value ratio than 95%, meaning you’d hold more equity. You would, however, have to pay interest on the loan after five years, plus a £1 monthly management fee.

There are brokers in our network who specialise in Help to Buy mortgages and it’s in your best interest to speak with them before you apply. They can help you decide whether using the scheme is a better alternative to the other 5% deposit mortgage options at your disposal, and if you choose to proceed, they’ll make sure you end up with the best possible deal available to you.

Using Shared Ownership

Shared Ownership is a middle ground between buying and renting. The scheme lets people buy a share of a property (between 25% and 75%) and pay rent on the remaining portion, usually to a housing association or local authority. It’s possible to get a Shared Ownership mortgage with just 5% deposit, and increase your share of the property over time through a process called staircasing.

Eligibility for the scheme is as follows…

  • Your household must be earning £80,000 (£90K in London) or less
  • Must be either a first-time buyer, a former homeowner who can’t afford to buy one now, or an existing shared owner who’s buying another property to move into
  • Have at least 5% deposit (but possible to put down more)
  • Limited to primary residences only
  • Limited to new-build homes and existing properties through resale programmes from local housing associations

You can read more about the scheme in our comprehensive guide to 5% deposit Shared Ownership mortgages.

Family assist mortgages

Also known as guarantor or springboard mortgages, a family assist mortgage can help you get onto the property ladder with 5% deposit, or no deposit at all. But you need to have a blood relative who’s willing to help you out financially and take on liability for the mortgage if you were unable to pay it.

Requirements for a guarantor mortgage are as follows…

  • Guarantor must be willing to secure the mortgage against either a property they own and hold enquiry in or place a lump sum into a savings account held by the lender
  • They must agree to step in to make any mortgage payments the borrower cannot
  • Guarantor must usually be a parent, adoptive, step-parent or grandparent, although some lenders are more flexible and will approve any blood relative
  • Both the borrower and the guarantor must meet the lender’s eligibility criteria

Read more about getting a family assist mortgage with 5% deposit in our guarantor mortgages guide.

Non-guarantee scheme 95% LTV mortgages

Since the mortgage guarantee initiative was announced, other lenders have re-entered the 5% deposit mortgage space and have begun offering 95% LTV deals outside of the scheme. The first lender to do so was an intermediary-only mortgage provider, which means its 95% mortgage offers, and indeed, all of its products, are available exclusively through mortgage brokers.

This new broker-only product comes with a five-year fixed rate (3.99%), £995 fee, free standard valuation and a maximum loan size of £500,000. It’s exclusive to first-time buyers but is not available for new-build houses, flats or properties in Northern Ireland.

The second lender to launch a new 95% LTV mortgage independent of the guarantee scheme was a mainstream provider headquartered in Ireland. Again, this product is only available through brokers, double underlining why you should speak to one if you only have 5% deposit to put down.

It remains to be seen how many other lenders will relaunch 95% mortgages outside of the mortgage guarantee initiative, but for the time being, it’s possible to get a 5% deposit mortgage without using any government scheme or a guarantor; but you’ll have the best chance of approval if you use a mortgage broker.

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How easy is it to get a mortgage with five percent deposit?

It’s more difficult to get one now than it was before the coronavirus pandemic as the majority of 95% LTV mortgages were withdrawn from the market. Only a handful of lenders continued to offer them, and even then it was largely through existing government schemes or guarantor agreements.

They are more readily available now than they were at the peak of the COVID crisis, thanks to the government’s guarantee scheme and lenders who’ve had the confidence to reintroduce 5% deposit mortgages to their product range. But the choice of approachable mortgage providers for anyone who isn’t using Help to Buy, Shared Ownership or a guarantor is currently less than 10.

You might find a 95 percent loan to value mortgage more difficult to get if…

  • You have bad credit: These deals are already considered higher risk, but throw bad credit into the mix and your choice of lenders will be even slimmer. A specialist bad credit mortgage broker, however, might be able to find options for you.
  • You’re buying an unusual property: Most 5% deposit mortgages have property type restrictions. For example, some of the government schemes are only available on new builds. Non-standard construction homes and unusual property types are difficult to buy with 95% LTV mortgages, but a broker who specialises in non-standard property deals can boost your chances of approval under such niche circumstances.
  • You’re retired: Applying for a mortgage after the age of 75 (or one that runs into your retirement years) often calls for professional advice from an advisor who specialises in later-life lending. You might run into age restrictions and the chances of rejection are even higher if you only have 5% deposit. The right broker can, however, offset this risk.
  • The source of your deposit is ‘non-standard: It can be difficult to get a mortgage with any loan-to-value ratio if the source of your deposit is considered ‘non-standard’. This would include profits from cryptocurrency, a gift from someone who isn’t an immediate family member or an unsecured loan. If you’re applying for a 95% LTV mortgage with a non-standard deposit, you should seek professional advice to find out what your options are.

If you’ve had difficulty getting a 5% deposit mortgage, the best thing you can do is speak to a broker who specialises in low-deposit lending. Even if you’ve been declined by a lender because of your deposit amount, their knowledge and expertise can really improve your chances of approval.

Are 5% deposit mortgages a good idea?

While 5% deposit mortgages offer a lifeline to people who would otherwise struggle to get onto the property ladder, they aren’t for everyone. There’s no one-size-fits-all answer to this question, but to help you determine whether they’re right for you, we’ve summarised their main pros and cons…

Advantages

  • You don’t have to spend as much time saving: Saving for a deposit is often the lengthiest part of the journey towards homeownership, so being able to buy a property with half the normal deposit amount should, in theory, shave a lot of time off the process.
  • Attractive rates are often accessible: With schemes like Help to Buy being geared towards first-time buyers, the interest rates are often highly competitive.
  • Products with long fixed rates are available: The new 95% LTV mortgages which launched in 2021 include products with five-year fixed-rate periods, meaning that you can lock yourself into a favourable interest rate, which a mortgage broker can help you secure.
  • It beats renting: For many people, at least. If you’ve got your heart set on homeownership but don’t believe you’re capable of saving 10% deposit, 95% LTV mortgages and 5% deposit schemes offer a potential path to the property ladder that you wouldn’t otherwise have.

Possible disadvantages

  • You might have limited equity: If you were to take out a 95% mortgage, you’d only hold 5% equity in your property and this means you might be at risk of falling into negative equity if there was ever a market crash in the years following the COVID-19 crisis.
  • Limitations of government schemes: Schemes like Help to Buy have helped many people onto the property, but they’re not without their drawbacks. For instance, Five years after buying your home, your repayments will become more expensive due to the interest kicking in, plus it can be difficult to remortgage if you haven’t paid off your equity loan.
  • You might be restricted on property choice: Many of these schemes and products have property type limitations. Some are limited to new-build houses, while others are not available on them at all.
  • Borrowing more means paying back more: This might sound obvious but consider the full implications of borrowing 95% of the property’s value versus saving up a while longer and borrowing 90%. Not only would your monthly payments be slightly higher, you’d be paying interest on that extra 5% for the duration of your mortgage term.

If you’ve read through the disadvantages above and are suddenly feeling anxious about your mortgage application, don’t panic. There’s no guarantee any of these drawbacks will apply to you and, with the help of the right mortgage broker, you can take steps to avoid any pitfalls. They can advise you on which product is the best fit for your needs and circumstances, as well as which lender is most likely to approve you for it. What’s more, they’ll even help you complete the paperwork!

Can you get a 95% LTV mortgage on a new build?

Yes, this is possible but not all mortgage lenders will approve your application if you’re buying a new build property. Some of the new 95% LTV mortgages that were introduced post-COVID are not available for new builds, but the mortgage guarantee scheme has no such restrictions, as long as the property you’re buying will be a primary residence and is valued at less than £600,000.

Moreover, it’s also possible to get a mortgage on a new build with 5% deposit through the Help to Buy scheme. The latest phase of the initiative (2021-23) is exclusively available for new builds, while Shared Ownership is only available on new builds and resale properties.

For more information see our guide to new build mortgages.

Speak to an expert about 5% deposit mortgages

If you’re applying for a mortgage with only 5% deposit to your name, the chances of rejection are high since many of these products were withdrawn from the market. But don’t let that put you off! We work with a network of expert brokers who specialise in low-deposit mortgages, and they can find the perfect solution for you, whether that’s a 95% mortgage or the Help to Buy scheme.

With the right mortgage broker on your side, you can boost your chances of approval and landing the best possible rates, but how do you go about finding the right broker?

This is where we come in! We offer a free broker-matching service that takes the customer’s needs and circumstances into account and pairs them up with the ideal mortgage advisor for them. In this case, it will be someone we’ve handpicked because of their track record helping people get onto the property ladder with just 5% deposit; but if your case calls for additional expertise because of factors like bad credit or a non-standard deposit source, we can find you an expert for those issues, too.

The right mortgage broker can help you save time and money in the long run, as well as make sure your deposit amount gets you as far as possible. Call 0808 189 2301 or make an enquiry and we’ll set up a free, no-obligation chat between you and your perfect advisor today.

FAQs

Can i get a 95% LTV or 5% deposit mortgage quickly?

On average, it takes between four and six weeks to obtain a mortgage offer, but you can potentially shave time off the process by applying through a mortgage broker. They can help you save time in lots of ways. For starters, they will do all of the legwork finding the best products available to people with 5% deposit, and they’ll also make sure you’re paired with the right mortgage lender first time, so avoidable rejections and re-applications won’t add any delays along the way.

Moreover, a broker can help you with all of the paperwork, which means you’ll get through it as quickly as possible, without making any errors that might hold things up.

What sources of deposit can I use?

Most lenders will be happy if the source of your deposit is your own personal savings or investments, a gift from an immediate family member, the sale of a property, or the sale of other assets that you can prove you legally owned. Anything else might be considered ‘non-standard’. This doesn’t mean getting a mortgage is impossible, but seeking specialist advice is highly recommended.

See our guide to acceptable deposit sources for more information.

Can I get a 5% deposit mortgage without using a government scheme?

Yes. In addition to guarantor mortgages, several lenders have introduced 95% LTV mortgage products outside of the new guarantee scheme. The majority of these are broker-only deals, so make an enquiry with us and we’ll match you with an advisor who has access to them.

Can I get a 95% LTV interest-only mortgage?

The maximum loan-to-value ratio for an interest-only mortgage is, at the time of writing, 85%, so you will need a deposit of at least 15% to qualify, along with a viable repayment vehicle.

If you have less than 15% deposit and want an interest-only mortgage, speak to a broker who specialises in these products. They can tell you whether deposit requirements are likely to change in the near future and suggest the best alternatives to a 95% interest-only mortgage.

See our guide to interest-only mortgages to find out more.

Can I get a 95% LTV self-build mortgage?

Self-build mortgages often call for large deposits, depending on how much risk is associated with the development project. It might, however, be possible to get one with as little as 5% deposit if you have other properties or valuable assets to secure against the mortgage loan.

If you’re applying for a self-build mortgage with only 5% deposit, professional advice is recommended. See our comprehensive guide to self-build mortgages to find out more.

Can I get a second home mortgage with 5% deposit?

Getting a 95% LTV mortgage on a second home is difficult since deposit requirements are usually higher. However, if you already have 5% deposit saved up, it may be possible to release equity from your primary residence and add this to your deposit funds to beef them up.

Releasing equity from a property isn’t something you should do lightly, so be sure to seek professional advice first. See our guide to second home mortgages for more.

Can I get a second mortgage with 95% LTV on my existing home?

It might be possible to take out a secured loan with an LTV of 95% on a home you already own and hold enough equity in, though this may depend on the purpose of the funds. For instance, some secured loan providers will lend at this LTV for home improvements but not, say, debt consolidation.

See our guide to second charge mortgages for more information.

Do I need extra for the exchange deposit?

The exchange deposit is the funds needed as a down payment during the exchange of contracts, and this would usually be a portion of the same funds you’ll use as the actual mortgage deposit. So, if you were getting a 95% LTV mortgage, you wouldn’t typically need to save up 5% deposit plus an exchange deposit. The same funds would cover both and later become your equity.

Are 95% mortgages still available through the NewBuy scheme?

No. The NewBuy scheme was closed around 2016 but was virtually inactive from 2013/14 when the government introduced Help to Buy. Schemes such as Help to Buy are considered better alternatives to NewBuy and have more than filled the void for customers with 5% deposits.

Can I apply for a 95% mortgage online?

Yes. You can make an enquiry with us online and we’ll be sure to refer you to a broker who’s willing to carry out your consultations online, if that’s your preferred channel. Be sure to let your broker know that you want to be matched with a lender who can do as much of the application online as possible so they can take you into account when seeking out the ideal lender for 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 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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