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Getting a Mortgage with a Small Deposit

What is the lowest deposit you can have for a mortgage? Find out here

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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: 23rd August 2019 *

How much is the minimum deposit for a mortgage?

For some, saving enough for a deposit is the biggest obstacle blocking their path to the property ladder, so it comes as no surprise that the most common question we’re asked is “what is the minimum deposit for a mortgage in the UK?”

The good news is that the expert advisors we work with know everything you need to know about low deposit mortgages, and how to go about getting them.

The following topics are covered below…

If you want to skip the reading and talk to an expert instead, call 0808 189 2301 or make a quick enquiry.

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The bigger the deposit, the better the deal

To put it simply, the larger the deposit you put down for a mortgage, the better the rates you’re likely to receive. Lenders tend to view customers with larger deposits as lower risk, so it’s usually a good idea to put down as much as you can afford.

But getting a mortgage with a low deposit, or high loan-to-value (LTV) ratio, can be invaluable if you don't have enough cash for a decent deposit and are struggling to save for one.

If you want to pay less deposit on your mortgage, some lenders might need you to pay more interest to protect their risk.

If you do want a high LTV mortgage, because it's preferable to trying to raise a higher deposit, you’ll need a good credit rating since most lenders will require proof that you'll be able to maintain the higher repayments.

For some borrowers, this will obviously be a lower sum than others, which is why so many customers want to know “how much is the minimum deposit for a mortgage in the UK?”

The answer is that it can differ from one lender to another and may also depend on the type of mortgage product you’re after.

For instance, minimum deposits for buy-to-let mortgages are often higher than for standard residential home loans, often coming in at 25%.

While many lenders prefer a minimum 10% deposit for residential mortgages, there are a number of providers who'll accept 5% deposit. A few lenders  even offer zero deposit mortgages, or 100% mortgages, for borrowers with no lump sum to put down, or when a family member is acting as a guarantor.

95% mortgages with 5% deposit

Some lenders will offer 95% mortgages outright if you pass their affordability checks, and the government’s Help to Buy scheme has made these deals easier to come by.

Since lenders typically reserve their best rates for borrowers with larger deposits, between 30-40% of the property’s value will get you a table-topping deal in most cases, you should be ready to accept higher interest rates when you only have a 5% deposit.

While you might need to accept less competitive interest rates, it doesn't mean there aren't great deals available if you only have a small deposit.

Find the best offers available on a 5% deposit mortgage by talking to a whole-of-market mortgage broker, like the ones we work with, who has access to low deposit mortgages from lenders across the whole UK. They'll be able to source great deals you won't find on the high street.

Minimum deposit mortgages on Help to Buy

Help to Buy was exclusive to new build houses at launch, but has since been expanded to other property types. To qualify, buyers need at least a 5% deposit and the property they’re purchasing can't be worth more than £600,000.

The government will supplement your deposit with an equity loan of up to 20% of the property’s value (40% in London), so you'll only need a 75% mortgage. Borrowers won't be charged any loan repayment fees for the first five years.

The obvious benefit of Help to Buy is that you can take out a smaller mortgage, but it’s important to remember that it's also possible to find 95% mortgage deals that don't involve Help to Buy, and you may even be able to get more competitive rates this way.

If you’re shopping around for mortgages with low deposits and are unsure whether to use Help to Buy, get in touch and the expert advisors we work with will help you find the lenders offering the most favourable deals for customers with a 5% deposit.

How much can I borrow on a 5% deposit mortgage?

In the recent past, lenders would calculate how much you could borrow by simply multiplying your annual salary by four or five. Lenders still do that today, but they’re also more concerned about affordability, and that comes down to more than just the number on your wage slip.

When determining how much they’re willing to lend you with a 5% deposit, mortgage providers will take the following factors into account:

  • Credit score - the cleaner, the better, but some lenders will consider borrowers with adverse credit on their files (the advisors we work with are experts when it comes to helping people with bad credit getting a mortgage).
  • Other outgoings - you'll be seen as lower risk if you have no other significant debts against your name when you make your mortgage application.
  • The property type - a standard house or flat made from bricks and mortar is generally more straightforward to secure a mortgage for than a non-standard property, such as a listed building or one with a thatched roof.
  • Your age - some lenders impose a minimum and maximum age cap. For example, they won’t cater for customers under 21 or over 75, but some providers will consider going higher or lower, under the right circumstances.

Low deposit mortgages and interest rates

If you're getting a mortgage with the minimum deposit required, you do so at the risk of unfavourable rates and extra fees. This is because higher loan to value (LTV) mortgages often have higher interest rates and charges attached, due to the extra risk the lender is taking on.

Some lenders might ask borrowers with minimal deposits to commit to a mortgage indemnity guarantee (MIG). This is a security policy which protects the mortgage provider if you default. This will usually be incorporated into the interest and fees.

Can I get a low deposit mortgage if I’m a first-time buyer?

Yes! In fact, you’re more likely to be offered one of the lowest deposit mortgage products if you're a first-time buyer.

Many 95% mortgages lenders have introduced are aimed at first-timers and the aim of government’s Help to Buy scheme is to help more people get a foot on the property ladder by making mortgages more affordable to first-time buyers too.

If you’re looking for the best low deposit mortgages for first-time buyers, make an enquiry and talk to one of the advisors we work with. They'll answer all your questions and search the entire market for the best 95% mortgage deals for you.

The service is entirely free of both cost and obligation, so save time, hassle and money by talking to someone who'll do all the legwork of getting you the best mortgage possible.

Getting a residential mortgage with a low deposit

Getting a residential mortgage with a low deposit is often more straightforward than a buy-to-let or commercial mortgage, since residential mortgages typically require a smaller deposit.

As we’ve already discussed, the minimum deposit you’ll need for a mortgage in the UK is 5% (unless you’re planning to pursue a zero deposit mortgage) and the lenders which offer these cater for residential buyers, as does the Help to Buy scheme.

The important thing to remember if you’re seeking a residential mortgage with a low deposit is that having access to the entire market is vital if you want to get the best rates available.

Many lenders will offer you unfavourable rates if you approach them with a 5% deposit, but the advisors we work with can help you find the providers who offer the best deals to customers in this situation.

Can I get a buy-to-let mortgage with a low deposit?

That depends on your definition of a low deposit, as buy to let mortgages generally require a higher deposit than residential mortgages.

Certain UK lenders will turn you away unless your deposit amounts to 25% of the property’s value, but some  will deal with customers with 20%, and a few will accept 10% or less, providing you pass their affordability checks.

If your deposit is at the lower end of this scale and you want a buy-to-let mortgage, your chances of getting one with competitive rates will depend on other factors such as the viability of the investment (i.e. whether the forecast rental income will cover the mortgage payments), your credit rating and your previous experience as a landlord.

As most buy-to-let mortgages are interest only, it may also help if you have a recognised repayment vehicle in place to fall back on when it comes to repaying the loan itself.

A 'repayment vehicle' is the term used for savings, investments or other assets you want to use to pay off the interest only mortgage at the end of your mortgage term.

The table below with give you an idea of which repayment vehicles lenders prefer.

Repayment Vehicle Accepted by... Notes
Existing Endowment Policy Most lenders Usually go on middle projected figure
Stocks/Shares ISA Most lenders Usually take 100% of balance
Savings in the bank Few lenders % of balance may be limited
Other investment bond Most lenders Usually take 100% of balance
Sale of this property Few lenders Usually required to have equity over 150k
Sale of another property Most lenders Usually ok, often limited to 75% LTV
Pension lump sum Few lenders Usually required to have a large lump sum

Can I get a low deposit mortgage while on benefits?

In theory, it’s possible to obtain a low deposit mortgage while on benefits but you'll be less likely to be able to secure the most competitive rates since you'll be restricted to only being able to get a mortgage from a select few lenders.

However, there are specialist lenders out there who have no problem dealing with borrowers who claim the following:

  • Child tax credit
  • Working tax credit
  • Child benefit
  • Disability Living Allowance (DLA)
  • Industrial Injuries Benefit (IIB)
  • Incapacity benefit (IB)
  • Attendance Allowance
  • Pension Credit
  • Maternity Allowance
  • Severe Disablement Allowance
  • Widow's Pension
  • Carer's Allowance

In some cases, the lender will only grant borrowers on benefits a loan if they’re also in full-time employment or retired.

However, if you have a clean credit rating and your other debts are minimal, it may be possible to find a specialist provider willing to offer you a decent mortgage deal.

When you want a mortgage and have very specific and potentially limiting circumstances, it's more important than ever to get advice from a whole-of-market mortgage broker, like the ones we work with.

Call 0808 189 2301 or make a quick enquiry and we'll match you with a broker experienced in helping people in similar circumstances secure competitive mortgages.

The service we offer is free, there's no obligation. Advisors only get paid if you get the mortgage you want, so everyone is geared towards the same goal of getting the best mortgage at the best available rate.

Can I get a right to buy mortgage with a low deposit?

The Right to Buy dates back to the days of Margaret Thatcher’s government, which allowed council house residents to buy their home at a heavily discounted price in the 1980s.

The scheme is alive and well today and it’s possible to take advantage of it with a minimal deposit. In fact, it may be possible to buy your council house with no deposit at all as, in some cases, the Right to Buy discount can be used in place of a mortgage deposit.

Can I get a low deposit mortgage if my family is helping me out?

Yes, some lenders are willing to accept gifted deposits for mortgage applications.

Most UK providers are happy with gifted deposits from family members, although this my affect the rates you're offered.

However, while most mortgage lenders will happily accept gifted deposits from family, very few will accept third-party gifts,so a gifted deposit from one or more of your friends wouldn't be quite so straightforward to proceed with.

There are a number of points you need to consider if all or part of your deposit has been gifted to you.

  • The person gifting the money must understand that they will have no interest in the property and no right to get their money back.
  • It’s possible to loan money to a family member, rather than gift it, and have it repaid upon the sale of the property. In this instance, you should seek independent legal advice.
  • The person gifting the money may have to complete a gifted deposit letter or the lender’s own documentation.
  • Many lenders will ask to see a bank statement as proof of where the deposit is coming from.
  • Gifted deposits can supplement a low deposit you have saved yourself and also be used in conjunction with Help to Buy.

Another option, instead of a cash gift would be to use a springboard mortgage. With this type of mortgage, instead of paying a deposit, your parents, or other close family member, place money into an account with the lender. After three years, provided the mortgage repayments have been kept up, they get their money back with interest.

If you want to know more about how to get a springboard mortgage or by using a deposit that is made up either partially or entirely of gifted money, get in touch and one of the whole-of-market mortgage brokers we work with will help you find a lender who specialises in circumstances like these.

Are there other ways raise a deposit?

Yes. There are a number of ways to raise a deposit apart from the traditional way of simply saving a deposit.

These include:

  • Equity release from an existing property (you can read more on this in the next section)
  • Parents could remortgage their home
  • Directors loans
  • Personal (unsecured) loans
  • Credit card (not recommended)

Raising capital on other property

If you're buying with little or no deposit and already own property, it may be possible to withdraw some of the equity by either remortgaging or taking a second charge secured loan for the amount of deposit you require.

Usually, if you have equity is available, a remortgage works out cheapest, but it’s not always the best option.

To get a better understanding of this, read about secured loans vs. remortgages or get in touch and we'll connect you with one of the expert mortgage advisors we work with. We'll make sure to match you with an advisor experienced in arranging mortgages for customers in situations similar to yours.

The service we offer is free and there's no obligation. Call 0808 189 2301 or make a quick enquiry and we'll work to save you time, hassle and money.

Concessionary purchases

A concessionary purchase is when you buy a property at a discount from the true market value.

Many lenders will base the value on the actual purchase price you have agreed, and your deposit will be based on that reduced value (e.g. £120,000 property discounted to £100,000, customer putting in a minimum of 10% = £10,000 deposit required).

On the flip side, some lenders accept the discount as a form of deposit and use the true market value at £120,000 (e.g. £20,000  discount and a minimum deposit of £12,000 required).

In this case, it may even be possible to buy with no contribution for deposit.

There are several different types of concessionary purchase; Landlord gift, developer gift, vendor gift and family gift.

Landlord gifted deposit/discount - a tenant buys from their landlord at a discounted purchase price.

E.g. the house is valued at £200k, but for a quick sale the landlord offers to sell it to his tenants for £180k, knocking 10% off the value, this 10% can be used by the borrower towards their deposit.

Currently, there are relatively few landlord discount mortgage lenders, but there are still some out there who consider these applications.

Often there are limits imposed on the amount of discount acceptable,. Generally, discounts cannot fall below a certain percentage (any discount under 5-10% will not count toward deposit).

Some lenders may also stipulate that the borrower puts in at least 5% of their own cash – because this indicates a certain level of commitment by the borrower who is then viewed, statistically, as being more likely to maintain repayments.

Developer gifted deposit /discount - similar to a landlord gifted deposit, a housing developer can sell a new property at a discounted price and the lender will apply this discount towards the borrower's deposit.

Again, most lenders will stipulate that the borrower must also commit some of their own cash, because sometimes new build properties can be viewed as being higher risk and many lenders require a 15-20% deposit regardless.

Vendor gifted deposit /discount - again, similar to a developer or landlord discount, this is simply a normal purchase on the open market but at a discounted value, usually to ensure a quicker sale.

These are less common and less frequently accepted by lenders as the risk is higher. In these circumstances your mortgage provider would want to establish the property's true value and the reasons why the vendor would want to sell at a cheaper price.

Family discount - the same as a vendor gifted deposit, but as a discount purchase from a family member.

These are more common arrangements and often come with much larger discounts from the true value of the property. As a result, more lenders will accept this kind of arrangement since the risk is deemed lower and the reason behind the discount more palatable.

In these cases, some lenders won’t require the borrower to input any of their own cash, and will apply the whole price discount to the mortgage deposit.

For many people, the above options just aren't possible - whether that's down to not having a wealthy family member willing to help out, a bad credit score, or maybe simply an affordability issue.

If you're really struggling to find ways to raise a deposit for a mortgage and want to read more about alternative ways you could approach this issue, take a look at our article about getting a mortgage with no deposit.

If you've been declined for a mortgage or are unsure about what next steps to take, it's a good idea to seek advice to find out what options may be open to you.

The specialist brokers we work with can point you in the right direction for what you need to do next.

Speak to a low deposit mortgage expert today

If you have questions about low deposit mortgages and which route might be best for you and your circumstances, speak to an expert for the right advice.

Call 0808 189 2301 or make an enquiry.

We'll match you with a broker who is experienced in successfully arranging mortgages for customers with similar circumstances to ensure you get the best possible advice.

The service we offer is entirely free and there's no obligation or marks on your credit rating. We'll work to save you time, hassle and money on your mortgage.

All the brokers we work with at Online Mortgage Advisor have passed a 12 module training course to make sure you get a 5-star service, and access to leading brokers who:

  • Are true experts in their field - OMA and LIBF Accredited
  • Cover the entire mortgage market
  • Have relationships with all of the leading providers

Which is why we’re consistently rated 5 stars by our customers on Feefo.

Updated: 23rd August 2019
OnlineMortgageAdvisor 2019 ©

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 info 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.

Find out more about the deposit you need for different mortgages

Mortgages and Deposits