5% Deposit Mortgage
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5% Deposit Mortgage
Lewis Shaw explains mortgages with 5% deposits.
Can I get a mortgage with a 5% deposit?
There are a few key factors to consider when applying for a mortgage with a 5% deposit.
First, is your income stable and high enough to borrow the amount you need? Second, is your credit profile strong enough to pass a lender’s assessment?
Most people can secure a mortgage with a 5% deposit if they have a good credit history and sufficient income.
There are some lender-specific caveats, but rather than listing every scenario here, it’s always best to speak directly with a mortgage broker. They can assess your circumstances and provide the most relevant advice.
What type of property can you buy with a 5% deposit?
You can purchase almost any type of property with a 5% deposit, but restrictions apply depending on whether it’s a new build and whether it’s a flat or a house. Different lenders have varying policies regarding the types of properties they accept for 5% deposit mortgages.
In general, you can buy a house, flat, or apartment, but the lender selection will depend on your personal circumstances and the property type. The key is finding the right lender that aligns with your situation and is comfortable with the property you’re purchasing.
Who is eligible for a mortgage with a 5% deposit? Is it just First-Time Buyers, or is it open to anyone?
Anyone can get a mortgage with a 5% deposit for a residential property. Buy-to-let mortgages are different, but this discussion focuses specifically on residential mortgages.
Broadly speaking, eligibility depends on your individual circumstances. If you have a history of bad credit, it may be more difficult to pass a lender’s credit assessment.
Your income type can also be a factor. If you have variable income or are self-employed, the process may be more complex, but it’s still possible. It’s always worth speaking to a mortgage broker, as we can explore the available options.
As of February 2025, the Mortgage Guarantee Scheme is in place, which means the government helps underwrite lenders that offer 95% loan-to-value mortgages.
This scheme encourages lenders to continue offering 5% deposit mortgages, which can be particularly helpful for First-Time Buyers struggling to save a larger deposit. If you’re moving home, these mortgages are still available—provided you meet the lender’s credit and affordability criteria.
What is the process to apply for a mortgage with a 5% deposit?
The first step is to seek independent mortgage advice. We want to ensure you’re eligible before you find a home, so there are no unexpected issues down the line.
The process involves:
- Speaking to a mortgage broker
- Providing all necessary documents as soon as possible
- Completing a fact-find (a detailed questionnaire)
The fact-find covers essential details such as:
- Your deposit source (savings, gift from family, etc.)
- Your income and employment details
- Your residential history
- Your credit profile and financial commitments
- Household composition (single buyer, couple, children, etc.)
Once we have this information, we apply for an Agreement in Principle at 95% Loan-to-Value (LTV). This means you’re approved in principle to buy with a 5% deposit.
After finding a property, the buying process is the same as if you had a larger deposit. The key challenge with a 5% deposit is passing the lender’s credit assessment, which can be strict. That’s why early advice is crucial to avoid potential pitfalls.
Mortgage Guarantee Scheme
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What government mortgage schemes are available with a 5% deposit?
The Mortgage Guarantee Scheme is currently available, where the government underwrites a portion of the lender’s risk. However, it’s important to note that this scheme protects the lender, not the borrower.
With a 5% deposit, there’s a higher risk of negative equity if house prices fall. If you can’t keep up with repayments due to job loss or illness and the lender repossesses the property, they might not recover the full loan amount. The Mortgage Guarantee Scheme helps lenders continue offering 5% deposit mortgages despite this risk.
Another option is Shared Ownership, where you purchase a percentage of a property and pay rent on the remainder. Some lenders allow a 5% deposit on the share you’re buying.
For example, if a property is worth £100,000 and you purchase a 25% share (£25,000), your 5% deposit would be just £1,250.
Additionally, some lenders not subscribed to the Mortgage Guarantee Scheme still offer standard 95% mortgages. As long as you meet their credit and affordability requirements, they may approve your application without any government support.
Do all lenders offer 5% deposit mortgages?
No, not all lenders provide 5% deposit mortgages. Some consider them too risky for their lending model.
However, many lenders do offer them, so there are still plenty of options. The key is finding the right lender that suits your financial situation.
Can I remortgage with a 5% deposit?
Remortgaging up to 95% LTV is rare, but possible. Only a few lenders allow it, and it depends on how much equity you have in your home.
If your mortgage balance remains at 95% of your home’s value when remortgaging, a handful of lenders may consider your application. However, options are limited, and eligibility will depend on lender criteria.
What credit score is needed for a 5% deposit mortgage?
Lenders have strict credit requirements for 5% deposit mortgages.
Since a lower deposit increases the risk of negative equity, lenders tend to charge higher interest rates and apply tighter credit scoring.
To improve your chances, you need a strong track record of repaying debts on time. If you’ve consistently met payments on credit cards, loans, or car finance and have no defaults or County Court Judgments (CCJs), you should be in a good position.
However, it’s important to understand that lender credit scoring differs from the scores you see on Experian, Equifax, or TransUnion. You may have an excellent consumer credit score but still not meet a lender’s internal criteria for a 5% deposit mortgage.
How can a mortgage broker help?
Getting a mortgage with a 5% deposit is common, but because the credit scoring process is strict, expert advice is essential.
Working with a mortgage broker means:
- Understanding which lenders are more likely to approve your application
- Avoiding wasted applications that could harm your credit score
- Ensuring you know your borrowing limits before house hunting
Many lenders also reduce borrowing multiples for those with a 5% deposit. If you’ve heard that you can borrow 4.5x or 5x your salary, that calculation may change when borrowing above 90% LTV.
That’s why early advice is crucial. Knowing your budget upfront means you can confidently make an offer without facing unexpected setbacks later in the process.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
