Low Deposit Mortgages
It can be possible to get a mortgage with a low deposit, an expert mortgage broker can help you with this.
Firstly, where is your deposit likely to come from?
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If you’re in the process of saving up to buy a house and struggling to reach your initial goal because of rising prices, or for any other reason, you might be wondering if it’s possible to get a mortgage with a low deposit.
This guide covers everything you need to know about how to buy a house with a small deposit. We’ll explain the minimum percentages, available government schemes, and how you can still get the best possible deal.
Keep reading for all the details or click on a link below to jump straight to a section…
Can you get a mortgage with a low deposit?
Yes, this is definitely possible. And, with house prices going up significantly over the last few years, a mortgage with low deposit requirements is necessary for many UK home buyers. However, your choice of competitive borrowing options will be smaller, so finding the best low deposit mortgages often requires expert guidance from a skilled advisor.
What is the lowest deposit you can get approved with?
The lowest deposit you’ll need for a mortgage in the UK is 5%. This means saving up for at least 5% of the property’s value that you’re hoping to buy, leaving you with a loan-to-value (LTV) ratio of 95%. But, even though 5% is the minimum percentage deposit for a mortgage, not every lender will offer this and there can be other rules and requirements to meet.
There can be creative ways to get a mortgage with little or no deposit. But it’s best to discuss these methods with an expert broker. They’ll be able to recommend relevant options based on your individual circumstances.
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Options you could consider
If you’re looking to get a mortgage with the lowest deposit possible, you have a few options to explore. Here are some of the main ways to buy a house with a low deposit:
- First-time buyer: if you happen to be a first-time buyer (FTB), it’s more likely you’ll be offered a mortgage with a low deposit. The bulk of 95% LTV mortgage products are aimed at FTBs. The Help to Buy scheme has helped many first-time buyers onto the property ladder, but the deadline to apply passed on 31st October 2022.
- Gifted deposits: some lenders will let you use gifted deposits from family members. But, you may be offered higher rates and very few will accept third-party deposit gifts (from outside your family).
- Guarantor mortgages: if you’re struggling to save for a deposit, guarantor mortgages (sometimes known as a family-assisted mortgage) can allow a family member to act as a guarantor for the mortgage and make payments if you don’t.
- Springboard mortgage: instead of a deposit, a springboard mortgage allows your family to put money in an account with the lender and if you keep up with the mortgage repayments, they get their money back plus interest after 3 years.
- Right to Buy: this is an old scheme that allows you to buy your council house at a discount. Often, you can make a purchase with a low deposit and sometimes it’s even possible to use Right to Buy with zero deposit.
- Concessionary purchases: If you get a discount on the true market value of a house, some lenders will let you use the discounted sum as a form of deposit. For example, your property purchase is discounted by 5% and you can then use this as part of your deposit. These are known as concessionary purchases
- Government schemes: can change from year to year, but recently the UK launched a low deposit mortgage scheme. It’s called the ‘mortgage guarantee scheme’ and was created to increase the number of small deposit deals available with major lenders who agreed to participate.
How to get a mortgage with a small deposit
Your first step should be to find a specialist mortgage broker who has experience arranging mortgages for people with a low deposit as this will boost your chances of getting approved at the best terms available.
Using our free broker-matching service you can speak straight away to the right broker by simply making an enquiry online. They’ll be able to help with:
- Readying all the necessary paperwork
- Downloading your credit reports
- Finding the right lender and securing the best deal for you
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Low deposit buy-to-let (BTL) mortgages
The process of getting a mortgage with a lower deposit will work differently if you’re planning to purchase a buy-to-let (BTL) property. Typically, BTL properties require a higher deposit than residential mortgages.
But, if you’re struggling to get the necessary deposit to put down, there can be other ways to get a competitive BTL mortgage with a small deposit, this could involve:
Options for borrowers in Scotland
Another reason it’s worth using the services of a skilled mortgage advisor is because there can be regional differences across the UK. One of the main areas to be aware of is Scotland, getting a mortgage with a low deposit can work differently here to the rest of the UK.
Getting a 5% deposit mortgage in Scotland was difficult over the last few years, but now it’s more possible for home buyers. Here are some of the most popular methods and things to be aware of when looking for a mortgage with a small deposit in Scotland:
- Mortgage guarantee scheme: providers only lend up to the purchase price or Home Report valuation, whichever is lower. This will impact you if you’re offering above the official valuation.
- 95% LTV mortgages: some niche lenders are offering 95% LTV products outside of the mortgage guarantee scheme, which is helpful if you can’t meet the eligibility criteria for high street lenders. But, you often need to find and access these unique deals through a trusted mortgage broker.
- First Home Fund: the Scottish government offers equity loans to first-time buyers where you put down a 5% deposit and they will add an interest-free loan of up to £25,000 to help you buy with more equity. You pay this equity loan back when you sell the property. The amount you pay back is calculated based on equity rather than the sum borrowed.
- Low-cost Initiative for First Time Buyers (LIFT): this scheme is for home-buyers who can’t afford to buy a house outright, or are unable to qualify for a standard residential mortgage. The two main types of LIFT agreements are the ‘Open Market Shared Equity’ scheme and the ‘New Supply Shared Equity’ scheme. These are often for social renters, armed forces, and buyers with disabilities.
- Guarantor mortgages: only a small number of Scottish lenders offer this type of loan, but guarantor mortgages are still worth looking into.
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Speak with a specialist to get the best mortgage with a low deposit
The right way to secure a mortgage with a low deposit that best suits your needs will depend on your personal circumstances. So, it’s important to deal with an expert broker who can find you a bespoke solution.
We offer a free, broker-matching service. This means we’ll quickly assess your situation and deposit size, then introduce you to a skilled broker who can find you the best low deposit mortgage.
Just call 0808 189 2301 or make an enquiry. We’ll arrange a free, no obligation chat between you and your ideal mortgage broker today.
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