5% Deposit Mortgage
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5% Deposit Mortgage
Rohit Kohli explains how a 5% deposit works.
Can I get a mortgage with a 5% deposit?
Yes. Lots of lenders are offering 5% deposit mortgages. Effectively, you’re borrowing 95% of the value of the property. There are plenty of lenders, but there are a couple of things to be aware of.
Firstly, it’s not going to be the cheapest rate. Because you’re borrowing so much of the value of the property, you’re probably going to pay more in interest.
There’s also a higher chance of negative equity, where your house could end up being worth less than the mortgage secured on it, if property prices were to fall in the future.
What type of property can you buy with a 5% deposit?
Most properties are eligible, but you’ll probably find that lenders exclude certain types. With most lenders, for example, you can’t borrow 95% on a new build flat. You may not be able to use a 5% deposit on a non-standard construction property, either.
It’s important to check each lender’s specific criteria on what they will and won’t accept in terms of property types.
Who is eligible for a mortgage with a 5% deposit? Can anyone have one?
Eligibility does vary by lender, but generally speaking, these mortgages target First Time Buyers or people looking to move home. To get a 95% deposit you generally need to have a good credit history. There are also some schemes for First Time Buyers that could be exclusive to you.
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What is the process of applying for a mortgage with a 5% deposit?
It’s not any different, but I would highly recommend speaking to a mortgage broker first. The main reason is that because the eligibility criteria is much stricter, you will want to know whether you would qualify for a 5% deposit mortgage.
A mortgage broker will be able to assess your circumstances fully and check which lender they can match you up with – and if you’re eligible.
If all is good, we can secure your Agreement in Principle, which means you can move forward with confidence.
What government mortgage schemes are available with a 5% deposit?
It’s a real shame, as at the moment the options are quite limited. We have the Mortgage Guarantee Scheme, which encourages lenders to offer 95% mortgages by providing a government-backed guarantee. If something were to go wrong in the future, the government would cover some of the cost.
One scheme that works well with a 5% deposit is shared ownership, where you can buy a share of a property and pay rent on the remaining portion [information correct at the time of recording in February 2025].
Do all lenders offer 5% deposit mortgages?
No, not all lenders provide 5% deposit mortgages. Some lenders target different customers, and so this type of mortgage is not for them.
It’s important to compare offerings from different lenders to find suitable options. That’s where a mortgage broker can come in – we will know which lenders are offering these mortgages and whether you match up to those lenders. It takes a lot of the effort away for you.
Can I remortgage with a 5% deposit?
Remortgaging with just 5% equity can be challenging. Lenders typically prefer more equity, due to the higher risk associated with remortgaging – in theory you should have gained more equity in the property by paying your mortgage back.
Certainly most lenders won’t allow you to release money up to 95% of your property value. It’s normally capped at 80% to 85%. So it can be more difficult to remortgage when you only have 5%.
What credit score is needed for a 5% deposit mortgage?
We touched on this earlier. You will need a good credit history for a 5% deposit mortgage. However, some lenders will still consider small blips in your credit history if there’s a reasonable explanation, and if everything has been okay since.
If it’s not a perfect credit score, you may still have some options. You may end up paying a slightly higher rate, but we could still find you a mortgage deal.
How can a mortgage broker help here? Is there anything else we need to consider?
There are a couple of things to consider with a 5% deposit mortgage. First, be mindful of other expenses like stamp duty, legal fees and moving costs. You may have the 5% deposit, but you may need more on top for those costs.
We’ll certainly be able to give you all the options and advise if a 5% deposit mortgage would work for you. That’s the big benefit of speaking to a broker. You’ll get a better understanding as to what could be possible for you.
Crucially, we provide access to a wide range of mortgage options. We take a lot of the effort away from you and give you confidence in buying a home.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.