95% Mortgages

Mortgage deposits can all too often prove to be the biggest hurdle for anyone looking to buy a property, particularly first-time buyers. Between rent, bills, and the cost of living, saving tens of thousands of pounds can feel out of reach. 

That’s where 95% mortgages are a real game changer for people who can afford the monthly repayments but need a little help lowering the upfront costs. With just a 5% deposit, you could potentially get the keys to your new home much sooner than you thought.

Can You Get a Mortgage with a 5% Deposit?

Yes, it’s possible. Aimed at buyers who have smaller savings but strong affordability, a positive credit record and a good handle on their money, 95% loan-to-value (LTV) mortgages are widely available from most, if not all, mainstream lenders. 

For a long time, following the 2007-08 financial crisis, the number of 95% mortgages declined. However, thanks to government schemes and renewed confidence among lenders, they have become a mainstay of the mortgage market again. 

Here are some simple examples of how much a 5% deposit could be in monetary terms for various property values. 

Can a First-Time Buyer Get a 95% Mortgage?

Yes, absolutely. In fact, 95% mortgages are designed with first‑time buyers in mind. These types of low-deposit mortgages help to overcome the biggest challenge new buyers face: raising a large lump sum.

Many products, including government-backed schemes such as the new Freedom to Buy Scheme, are available to both first-time buyers and home movers. The criteria are mostly the same, but first-time buyers may also be eligible for other reliefs, such as Stamp Duty Land Tax relief on properties up to £500,000.

The key to a successful application is meeting the lender’s core eligibility and affordability checks. A stable income, good credit history, and a manageable level of existing debt will put you in a very strong position, regardless of whether it’s your first home or your next.

How Much Can You Borrow with a 5% Deposit?

How much you can borrow depends on your affordability, not just the size of your deposit. Lenders need to be confident you can comfortably afford the monthly repayments, even if rates were to rise.

Most lenders use an income multiple of between 4.5 and 5 times your annual income. However, some may stretch this to 5.5 or even 6 times your income if you have a high income, low debts, and an excellent credit history.

Since 95% mortgages involve borrowing a higher amount, lenders will scrutinise your outgoings and debt-to-income ratio very closely to ensure the repayments are sustainable.

Here's a Simple Example:

If your salary is £40,000 per year, using a typical income multiple of between 4.5 and 5, you could potentially borrow up to £180,000 to £200,000.

If you're buying a property for £200,000 with a 5% deposit (£10,000), you would need to borrow £190,000. To comfortably meet this loan amount, you would need a minimum income of around £38,000 (using a 5x multiple) or £42,250 (using a 4.5x multiple).

To see how this might work out for you, based on your annual income, take a look at our quick and easy-to-use affordability calculator. 

You can also use our mortgage repayment calculator below to see what the amount you're looking to borrow could cost you each month and check if this fits with your budget.

Are 95% Mortgages More Expensive?

Generally, yes, a mortgage with a 5% deposit will have a slightly higher interest rate compared to a mortgage where you put down a larger deposit, such as 10% or 15%. This is the trade-off for needing less cash upfront.

The reason is simple: Lenders view a higher loan-to-value (LTV) mortgage as a greater risk. If house prices fall, the lender is more exposed to losing money because the outstanding loan amount is closer to (or potentially higher than) the property's value.

So, while you will pay more each month than someone with, say, a 20% deposit, getting on the ladder now means you stop paying rent and start benefiting from any house price increases, which can often outweigh the slightly higher initial interest rate.

Interest Rate Comparison Based on Deposit Size

Are 95% Mortgages Harder to Get?

While the application process for a 95% mortgage is generally the same as any other loan, the criteria are often more stringent because the lender is taking on higher risk.

You’ll need to make sure your financial profile is in the best possible shape. Lenders will be looking for stability, evidence of responsible borrowing, a clean credit history and a proven ability to manage a budget. 

However, the main high street banks and building societies offer these products, often backed by the government's Freedom to Buy Scheme, so there is no shortage of options. The key is finding a mortgage broker (like us!) who knows exactly which lenders are most likely to approve your application based on your specific circumstances.

Are 95% Mortgages a Good Idea?

Like any financial product, mortgages with a 5% deposit have clear benefits but also come with a few things to watch out for. Here's the good and the bad.

What Are the Alternatives?

If a standard 95% mortgage doesn't feel right, or if you don't quite meet the eligibility criteria, there are several excellent alternatives designed to help people with a low deposit.

• Freedom to Buy Scheme: This is the main government-backed scheme that encourages lenders to offer 95% LTV deals by guaranteeing a portion of the loan. It is available to both first-time buyers and home movers buying a property up to £600,000.

• Shared Ownership: Instead of buying the whole property, you buy a share (usually 25% to 75%) and pay rent on the rest to a housing association. Your deposit and mortgage are based solely on the share you purchase, making the upfront cost significantly lower.

• Guarantor Mortgages: A family member or close friend uses their own property equity or savings as security for your loan. This reduces the risk for the lender, allowing you to borrow at a lower rate or with less deposit.

• Deposit Unlock: This is a scheme designed specifically for new-build homes, allowing buyers to secure a 95% LTV mortgage from participating lenders, backed by an insurance policy paid for by the developer.

Can You Get a 95% Mortgage with Bad Credit?

It's possible, but definitely more challenging. Lenders are already taking on a higher risk with this level of lending, so they prefer applicants to have a clean credit history and solid financial standing.

If you have minor credit issues, like a missed payment or two from a few years ago, a mainstream lender might still approve a 5% deposit mortgage if everything else is perfect. However, if you have more severe issues, such as a recent default or a County Court Judgment (CCJ), your options at 95% LTV will be severely limited, or non-existent with high street lenders.

In this situation, you would need to work with a specialist broker, such as our sister brand Haysto. 

They can help you find lenders who are prepared to look beyond your credit score and focus on your current income and situation. You might need to raise a slightly higher deposit (perhaps 10% to 15%) to offset the credit risk, but homeownership is still achievable.

Why Pick Picnic for Your 95% Mortgage?

With almost all mortgage lenders now offering them, finding the right 95% mortgage deal on your own could be a challenging and time-consuming process. Having an experienced mortgage broker on your side - like us! - makes things much easier and more efficient. 

With access to the most competitive mortgage deals, easy-to-use technology, and 100+ experts, our award-winning service is with you every step of the way. Here’s how we can help:

• Finding you the best 5% deposit mortgage deals: Our mortgage team will already know which lenders are currently offering the most competitive rates for this type of home loan. They can compare the current 95% mortgage deals available to find the one that’s right for your circumstances. 

• Your mortgage, made simple from start to finish. Our online portal allows you to track your mortgage application step-by-step, sign and upload documents in seconds, and contact your mortgage team at any time. No back-and-forth emails. No printing. No guesswork. Everything you need, all in one place, so you can stay organised and in control of your mortgage journey. 

• Making mortgages possible, whatever the circumstances: Our team of advisors have a clear understanding of the eligibility criteria used by each lender and will identify the one that's best placed to help. Our sister brand, Haysto, has become the No.1 destination for customers who've been turned away elsewhere. For anyone with a complex income or adverse credit record - we’ve got your back!