Saving a large deposit can delay your plans to buy a house, but a 5% mortgage offers another route. You put down 5% of the property price and borrow the remaining 95%, subject to the lender’s checks.
Although 5% mortgages may suit first-time buyers and home movers, a smaller deposit can mean higher rates and less equity. Before deciding whether a 5% mortgage is right for you, weigh up the costs and risks.
What a 5% mortgage could make possible
DEPOSIT
Buy with a 5% deposit
You may be able to buy with just 5% of the property price instead of waiting to save a larger deposit.
TIMING
Start your home search sooner
A smaller deposit could help you start looking for a home sooner rather than waiting to save more.
MORTGAGE OPTIONS
Explore 95% mortgage options
Compare available rates, fees and lender criteria to find a 95% mortgage that may suit you.
MONTHLY COSTS
Plan your monthly repayments
Estimate your mortgage repayments and other buying costs before deciding what fits your budget.
How much could you borrow?
Use our affordability calculator for a quick estimate.
What is a 5% mortgage?
A 5% deposit mortgage is a type of mortgage that lets you borrow up to 95% of a home’s value. Lenders call it a 95% loan-to-value (LTV) mortgage, or simply a 95% LTV mortgage.
How deposit size changes the mortgage
Mortgage details
With a 5% deposit
With a 10% deposit
Property price
£250,000
£250,000
Deposit needed
£12,500
£25,000
Mortgage required
£237,500
£225,000
Loan-to-value
95% LTV
90% LTV
With a larger deposit, you can borrow less and may have more mortgage deals to choose from, often at lower rates.
However, your deposit is not the only cost of buying a home. Your budget may also need to cover legal work, a survey, mortgage fees and removals. Depending on where you buy, Stamp Duty or an equivalent tax may apply.
Who can get a 5% mortgage?
5% mortgages are not limited to first-time buyers. Some lenders also offer them to home movers and other applicants with a small deposit.
Whether one is available to you will depend on your circumstances and the lender’s criteria. Your income, credit history, existing commitments, deposit source and the type of property you want to buy can all affect your options.
Some properties or mortgage types may have stricter requirements. For example, lender criteria can differ for new builds, flats and unusual properties, while buy-to-let mortgages will usually require a larger deposit.
What lenders check for a 5% mortgage
Lenders still carry out a full affordability and eligibility assessment when you apply with a 5% deposit.
Income and affordability
Lenders assess your income, regular spending and whether the repayments appear affordable.
Existing commitments
Loans, credit cards and other regular commitments can affect how much you may be able to borrow.
Credit history
Your credit record can affect the lenders and mortgage options available to you.
Deposit source
Lenders may ask where your deposit has come from and require evidence of the funds.
Property
The property must meet the lender’s criteria, which can vary for new builds, flats and unusual properties.
How much could you borrow?
Lenders decide how much you can borrow based on affordability, not simply the size of your deposit. They consider your income, household costs, debts and whether you could manage the repayments if rates increased.
An Agreement in Principle can give you an early borrowing estimate, although it is not a formal mortgage offer.
Get an Agreement in Principle →
Is a 5% mortgage worthwhile?
A 5% mortgage could help you buy sooner, but borrowing at a higher loan-to-value can also mean higher costs and less equity in your home.
Why it may suit you
A smaller deposit could allow you to buy sooner rather than waiting several more years to save. This may be particularly useful if property prices are rising faster than your savings.
What to consider
95% mortgages can have higher rates than lower loan-to-value deals, and you will begin with less equity in your property. If house prices fall, this can increase the risk of negative equity.
Worth knowing
A 5% deposit gives you less equity from the outset, so a fall in property value could increase the risk of negative equity.
How does the Mortgage Guarantee Scheme work?
The Mortgage Guarantee Scheme supports participating lenders in offering 95% mortgages to eligible borrowers.
What the scheme does
Under the scheme, the government provides participating lenders with a guarantee covering part of eligible lending between 91% and 95% loan-to-value. This can help lenders offer mortgages to borrowers with smaller deposits.
What it does not change
The guarantee protects the lender, not the borrower. You still need to provide your deposit, make the monthly repayments and pass the lender’s affordability and credit checks.
Not every lender participates and not every 95% mortgage uses the scheme. Other low-deposit options may also be available.
How Muttuo Mortgages can help
A 5% deposit can open up a range of mortgage options. We can help you understand what may be available based on your finances and plans.
Check your affordability and likely borrowing range
Compare 5% mortgage options from more than 100 lenders
Understand which options may suit your deposit and circumstances
Talk through your options
Explore low-deposit mortgage options and understand how your deposit could shape the rates and deals available to you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Your low-deposit mortgage questions answered
Do 5% mortgages usually cost more?
95% mortgages can have higher rates than mortgages requiring a larger deposit. Compare the rate, fees and total cost rather than looking at the headline rate alone.
Can you get a 5% mortgage on a new-build home?
Possibly, but lender criteria can be stricter for new-build properties, and some lenders may require a larger deposit.
Do all 5% mortgages use the Mortgage Guarantee Scheme?
No. Some 95% mortgages are offered outside the Mortgage Guarantee Scheme, and not every lender participates.
Can home movers get a 5% mortgage?
Yes, some lenders offer 95% mortgages to home movers as well as first-time buyers, subject to their eligibility and affordability criteria.
