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5% Deposit Mortgages | 95% Mortgages Explained

5% deposit mortgages can speed up first time buyers getting on the property ladder and home movers can get them too. But you’ll usually pay higher mortgage rates. We look at the pros and cons of 5% deposit mortgages, the different types you can get and how to find the best deals.

5% deposit mortgages

KEY INFORMATION

5% deposit mortgages: A summary

  • 5% deposit mortgages allow you to buy a home by putting down a deposit of just 5% of the property’s value, and taking a 95% mortgage to cover the rest.
  • They’re a particularly useful way of speeding up how quickly first time buyers can get on the property ladder.
  • But 5% deposit mortgages usually come with higher mortgage rates than you would get if you had saved a bigger deposit.
  • 5% deposit mortgages are widely available. Some are offered via the government-backed mortgage guarantee scheme.

What is a 5% deposit mortgage?

A 5% deposit mortgage means you can buy a house with a 5% deposit and take out a mortgage for the remaining 95%. These mortgages are also called 95% mortgages or 95% Loan to Value (LTV) mortgages (loan to value means the percentage of the property’s value that’s covered by the mortgage).

Example of a 5% deposit mortgage

Here’s how it would work if you’re buying a £300,000 house with a 5% deposit:

Purchase price5% deposit amount in £95% mortgage amount in £
£300,000£15,000£285,000

Who are 5% deposit mortgages helpful for?

  • First time buyers most commonly take out 5% deposit mortgages because of difficulties saving up a large deposit. While the average first time buyer put down a 20% deposit of £61,090 in 2024 according to Halifax, many first time buyers have much smaller deposits.
  • Home movers may also want to use 5% deposit mortgages. For example, if a homeowner wants to move but doesn’t have enough equity in their current home to put down a bigger deposit.

Could you get a 5% deposit mortgage? Use award-winning broker L&C’s online mortgage finder, or speak to an expert adviser. They offer fee-free advice.

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Advantages of 5% deposit mortgages

– You can get on the property ladder sooner

If you take out a 5% deposit mortgage to buy a house you may be able to buy your own home much sooner than if you wait to save for a 10% deposit or more. Buying sooner also means you’ll avoid spending more money on spiralling rents.

– You’ll build equity in your home

Equity is the proportion of your home that you own. This includes the deposit you’ve paid. Every time you make a mortgage payment, you will increase the amount of equity in your home. You can also build up equity in your home if it’s value increases.

Depending on how much equity you build up while you have your 5% deposit mortgage, you may have a 10% deposit or bigger by the time you remortgage. This usually means you’ll then be able to access a wider range of mortgage options and at better rates.

– 5% deposit mortgages are widely available

Many mortgage lenders now offer 5% deposit mortgages so you may have a wide choice. More lenders started offering these 95% mortgages after the government introduced the mortgage guarantee scheme. But many lenders offer these mortgages without using the scheme.

See the deals you qualify for and how much you could borrow:

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Disadvantages of 5% deposit mortgages

– Higher mortgage rates

If you have a 5% deposit, lenders will generally view you as more risky than someone who is putting more of their own cash into the property purchase. As a result, mortgage rates on 5% deposit mortgages tend to be higher. So it’s extremely important to shop around. For the latest rates on 5% deposit mortgages (and for all deposit levels from 0%-40%) see our guide on the best First time buyer mortgage rates.

By way of illustration, the following table compares how much you’ll pay on your monthly mortgage payments if you’ve got a 5% deposit, 10% deposit and 25% deposit, using the mortgage rates available in May 2025 for each deposit level. The figures are based on taking out a £200,000 mortgage over 30 years and excludes any fees.

Mortgage amountDeposit %Interest rateMonthly mortgage payment in initial term
£200,0005%4.90%£1,062
£200,00010%4.43%£1,005
£200,00025%3.92%£946

– Risk of negative equity

The risk of negative equity (i.e. when the value of your home is lower than your outstanding mortgage balance) may be higher with a 5% deposit mortgage than if you put down a larger deposit. However, by taking out a repayment mortgage, you’ll be building up equity in your home and hopefully your house will increase in value over time too. But you should think carefully before committing.

– Difficulties for self-employed

Self-employed people may find it harder to get 5% deposit mortgages as some lenders only offer self-employed mortgages to people with a 10% deposit or more.

5% deposit mortgage eligibility

While each mortgage lender has its own criteria, here are some of the common criteria you’ll typically need to meet when applying for 5% deposit mortgages:

  • Income assessment: Lenders usually let you borrow up to between 4.5 and 5.5 times your salary. But lenders must also assess the monthly payment you can afford, after considering your outgoings. Our how much can I borrow for a mortgage calculator is a good place to start to see how much you can afford to borrow for a mortgage.
  • Your credit history: Lenders check your credit history when you apply for a mortgage. And you may be less likely to get a 5% mortgage if you have a bad credit history.
  • Property value: If your 5% deposit mortgage is backed by the mortgage guarantee scheme, the property must be worth £600,000 or less. Although some lenders may have a lower maximum amount they’ll lend. For example, Barclays says you can apply to borrow up to £570,000 for a house or £275,000 for a flat.

Should I get a mortgage with a 5% deposit?

If you can buy a house you can afford with a 5% deposit mortgage, and the repayments are affordable, then yes, it may be right for you. Buying sooner rather than later means you’ll start paying off your mortgage earlier – and won’t be using your hard-earned cash paying off your landlord’s.

When your mortgage deal ends, you’ll hopefully be able to remortgage onto a better deal. For example, if you have 10% equity in your home at the end of your mortgage deal due to the mortgage repayments you’ve made and any house price increases, you may have a better choice of mortgages at better mortgage rates.

But you’ll need to weigh that up against the downsides listed above. And get advice from the experts before making a decision.

The Expert’s View

Mortgage Expert David Hollingworth property expert gives his view on Own New Rate Reducer scheme

David Hollingworth of L&C Mortgages says having a good supply of mortgage options for buyers with a small deposit ‘could be invaluable in accelerating their ability to get on the housing ladder. Mortgage rates will be higher than for those with a bigger deposit but that has to be balanced against the chance to buy sooner or even at all.’

5% deposit mortgage calculators

Use these handy online tools to see instantly how much you may be able to borrow and how much your mortgage will cost. Our how much can I borrow for a mortgage calculator looks at how much you may be able to borrow based on your income while our mortgage cost and repayment calculator will give you an idea of what your monthly mortgage costs are likely to be.

You can then find out exactly what you can borrow by speaking to our fee-free mortgage broker partners at L&C. They can give you no-obligation mortgage advice and set out your options today, fee-free.

Best 5% deposit mortgage rates

Here are the best 5% deposit mortgage rates in March 2025. The tables shows the rate you’ll pay in the initial term, fees you’ll have to pay the lender and then the monthly cost you’ll pay if you borrow £100,000 and £200,000 over a 30 year mortgage term.

Best 2 year fix 5% deposit mortgage rates

LenderInitial rateFeeMonthly cost on £100,000 mortgageMonthly cost on £200,000 mortgage
Halifax5.29%£1,099£555£1,109
Lloyds Bank5.29%£999£555£1,109
Nationwide5.29%£499£555£1,109

For the best mortgage rates on 5 fixed rate and variable rate mortgages, read our guide to the best first time buyer mortgage rates.

How to apply for a 5% deposit mortgage

Here’s the step-by-step process to finding and applying for 5% deposit mortgages.

  1. Pull together your deposit. Will you save up what you need? Could family help by giving you a gifted deposit? And if you’re aged 18-39, could you get a boost to your deposit from the government by saving into a Lifetime ISA. Find out more in our guide on Best Lifetime ISAs
  2. Shop around for the best mortgage deals. Speaking to a fee-free mortgage broker is the easiest and quickest way to do this. They’ll find the best deal for your circumstances and match you to the lender most likely to accept your application.
  3. Get your mortgage in principle: This is an indication that a lender could lend you a specified amount, based on details you’ve provided about your income, spending and debts. With mortgage brokers L&C, you can get a personalised Decision in Principle in just a matter of minutes.
  4. Apply for your mortgage. Read our guide on How to make a successful mortgage application If you use a mortgage broker, they’ll handle the application for you.

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What types of 5% deposit mortgages are there?

When you take out a 5% deposit mortgage you’ll need to decide what type of mortgage to take out.

  • Many first time buyers choose fixed rate mortgages because they’ll know how much mortgage payments will be during the initial term, usually 2 – 5 years.
  • However, some first time buyers prefer variable rate deals, hoping the amount they’ll pay on their mortgage will go down over time (although that’s risky as rates could just as likely go up).

Pros & cons: Fixed vs variable rate

Mortgage typeProsCons
Fixed rate mortgageYou’ll pay a fixed rate during your initial term, usually 2-5 years. So there’s no risk that you’ll have to pay more on your monthly mortgage payments if interest rates increase.If interest rates fall, you won’t see a reduction in the amount you pay on your mortgage.
Tracker mortgagesThe rate you’ll pay will go up and down in line with the base rate. This means if the Bank of England cuts interest rates, your mortgage payments will go down. If interest rates increase, your mortgage payments will go up.
Discounted mortgagesDiscounted mortgages track under the lender’s standard variable rate. So your mortgage rate could go down.The rate you’ll pay is linked to the lender’s SVR and it will decide whether to pass on all – or any – of an interest rate cut. Also, the rate you pay could increase.

2 year vs 5 year mortgage deals

  • Most people take out mortgage deals for 2 or 5 years. Although other common terms are 3 and 10 years.
  • Advantages of choosing a longer term (5 years +) include having certainty over your deal for a longer period.
  • But a disadvantage is you’ll be tied in for longer and may not be able to switch to a better deal without needing to pay an early repayment charge, and these can be hefty.
  • So you’ll need to weigh it up carefully. To help you decide what’s best for you it’s a good idea to chat through the pros and cons with a fee-free mortgage broker.

Find out how much you can borrow with fee-free mortgage advice. Start the process online or over the phone now

How does the mortgage guarantee scheme fit in?

The mortgage guarantee scheme was launched in 2021 to increase the supply of 5% deposit mortgages and stimulate the housing market after the pandemic by supporting mortgage lenders with a government-backed guarantee. Here’s how it works for:

  • Borrowers: If you apply for a 95% mortgage that’s backed by the mortgage guarantee scheme, the mortgage application process will work in largely the same way as if you get a standard mortgage.
  • Lenders: The government guarantees the portion of the mortgage over 80%, meaning it will cover some or all of the shortfall if your house is repossessed and sold for less than the outstanding mortgage amount.

The mortgage guarantee scheme runs until June 2025 and is set to be replaced by a permanent Freedom to Buy scheme which is expected to work in a similar way.

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It’s worth noting that the mortgage guarantee scheme offers benefits to lenders but there aren’t specific benefits to you as a borrower if the lender is using the scheme. And with so many 95% mortgages available you don’t need to worry about this scheme too much.

Eligibility criteria for the 95% mortgage guarantee scheme

95% mortgage guarantee scheme eligibility criteria includes:

You must be buying a main home to live in

The property must be worth £600,000 or less

  • However, some lenders using the scheme may have a lower maximum amount they’ll lend

You can apply for any property type

  • You can buy new builds or older properties with this scheme. However, the type of property each lender will let you buy varies. For example, some lenders won’t lend on new builds via this scheme.

You’ll need a deposit of 5%-9%

  • You’ll need to take out a mortgage with an LTV of 91% to 95%. So on a £200,000 property, your deposit would need to be between £10,000 (5%) and £18,000 (9%).

You must apply for a repayment mortgage

  • You must apply for a repayment mortgage: You can’t take out an interest-only mortgage with this scheme. Plus, you’ll need to pass the lender’s usual affordability checks.

How common are 5% deposit mortgages?

More than 50,000 95% LTV mortgages have completed using the mortgage guarantee scheme since it launched in 2021 according to Gov.uk stats. Some 86% of these were first time buyers taking out 5% deposit mortgages.

The mean value of a property bought or remortgaged via this scheme was £208,400, compared with the national average of £292,000.

5% deposit mortgages and new builds

It can be harder to get 5% deposit mortgages if you’re buying a new build because many lenders are reluctant to offer high LTV mortgages, especially if you’re buying a new build flat, to protect themselves from the risk of the property falling in value in the early years. Read more in our guide on New build mortgages explained.

However, there are schemes that allow you to buy a new build home with 5% deposit mortgages including “Deposit Unlock”. Although there are disadvantages to using this scheme such as having a limited choice of property and mortgage lender, so do your research carefully first. Read more in our guide Deposit Unlock scheme explained

Get fee free advice on all your first time buyer mortgage options with mortgage brokers L&C

Mortgage Finder

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

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Remortgaging a 5% deposit mortgage

Remortgaging a house with a 5% deposit works in the same way as if you have a larger amount of equity in your home. Although you may have a smaller choice of lenders and have to pay higher mortgage rates.

You can work out your home equity by taking away your outstanding mortgage balance and any outstanding secured loans from the value of your property.

For example, if your home is valued at £200,000 and you have £190,000 left to pay on your mortgage, the amount that’s left is your equity in the property – in this case £10,000.

Mortgage Equity Calculator

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Process of remortgaging a 5% deposit mortgage

  • If your current mortgage deal ends in the next six months you should start the remortgage process now.  Speak to a fee-free broker to find the best deal
  • Once you’ve found the best rate, lock it in. Then keep an eye on mortgage rates to see if a better deal comes up before you need to switch. Mortgage brokers L&C offer this Rate-Check service for free.
  • If you’re on your lender’s standard variable rate, you should urgently review your remortgage options because typical SVR rates are significantly higher than the best remortgage deals available.

Government schemes: Alternatives to 5% deposit mortgages

If you have a small deposit, there are alternatives to 5% deposit mortgages that you may want to consider including:

  • Shared ownership: This involves buying a share of a property and paying rent on the remaining share. This means you need a smaller mortgage and therefore an smaller deposit. But there are pros and cons to this complicated scheme, so we’d always recommend buying on the open market if you can. Find out more in our guide on Shared Ownership.
  • The First Homes scheme which gives first-time buyers the opportunity to buy their home at a 30% discount. But there’s eligibility criteria to meet and First Homes are scarce. Read more in our guide to the First Homes Scheme.
  • Right to Buy: If you live in a council house or flat you may be able to buy your home at a discount under the right to buy scheme. Read more about right to buy.
  • Rent to Buy. You can rent a newly built home with the intention to buy, thanks to this government scheme. See if Rent to Buy is the right scheme for you
  • 100% mortgages: While Skipton Building Society offers a 100% mortgage designed to help renters buy a home if they have a minimum 12 month proven track record of paying rent, as well as, meeting other lending criteria. See our guide for more advice on how to get a mortgage with no deposit.

Other costs when buying a house

Don’t just focus on your deposit, there are other costs of buying you’ll need to factor in. See the summary below or use our cost of moving calculator to get an estimate of the costs to budget for:

Stamp duty

Survey costs

Mortgage fees

Get free advice from award-winning mortgage brokers L&C today. You can speak to them or start the process online, or use a range of calculators to see how much you can afford.

Mortgage Finder

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

Find a mortgage

Frequently asked questions

What if I don’t qualify for a 95% deposit mortgage?

There are many reasons why you may have a mortgage application declined, such as if you have poor credit history, you’re not registered to vote, you have too much debt or the lender’s calculations say you won’t meet its affordability criteria. Find more information in our guide Mortgage declined? Here’s what to do next.

Can I get a mortgage with no deposit?

Yes, you can get a mortgage with no deposit. Skipton Building Society offers a 100% mortgage for renters who have a proven track record of paying rent. Other types of no deposit mortgages include guarantor mortgages, which is when a loved one takes on some of the mortgage’s risk by acting as a guarantor. This usually involves using their savings or home as security against the loan. Find more information in Guarantor mortgages explained. Family offset mortgages work in a similar way to guarantor mortgages that use savings as security. The main difference is that your loved one won’t earn interest on their savings. But as it’s an offset mortgage, you will only pay interest on the difference between the total value of the mortgage and the value of the savings held in the linked savings account.

Should I wait until I have a bigger deposit?

This will depend on your circumstances. But don’t assume you’ll have to wait to save a bigger deposit without getting advice from an expert mortgage broker first. Once you know what you can afford to borrow on a mortgage, you’ll be better placed to decide whether you should buy now or wait.  

Can you get interest-only 5% deposit mortgages?

The amount of deposit you’ll need for an interest-only mortgage will vary by lender but you’ll usually need a bigger deposit than for a repayment mortgage as banks view them as riskier. When you take out an interest-only mortgage, your monthly repayments will only cover the interest on your loan, you won’t pay off any of the capital you have borrowed. So you’ll need to have a plan from the outset of how you will repay the loan at the end of the term. Read more in our guide What is an interest-only mortgage? However, you can’t get an interest-only mortgage with 5% deposit mortgages backed by the mortgage guarantee scheme.

Related Reads

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HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.

Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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