For first-time buyers, but sometimes even existing property owners, saving a large deposit is probably the hardest part of buying a home.
If you’re paying rent, or an existing mortgage, finding enough spare cash in your monthly income to save for a property deposit is tough.
So, first-time buyers in particular are often left with a small deposit – sometimes as little as 5% of a property’s purchase price.
That means getting a 95% mortgage – but what are 95% mortgages and can you get one?
We’ve explained everything you need to know here…
What is a 95% mortgage?
A 95% mortgage means you’re borrowing 95% of your property’s purchase price through a mortgage – and providing the remaining 5% yourself as a deposit.
That would mean the loan-to-value of your purchase is 95% and this can impact the number of mortgages that are available to you.
Are 95% mortgages available?
Mortgages for buyers with only a 5% deposit are always less widely available than those with larger deposits – but they are available and could be even more common thanks to the government’s 95% mortgage guarantee scheme.
The scheme was announced in March 2021 and is now up and running in a bid to encourage more lenders to loan at higher loan-to-values, up to 95%.
How the 95% mortgage guarantee scheme works
For you as a buyer, mortgages offered under the guarantee scheme will appear exactly the same as one from outside of the scheme.
For the lenders, though, the scheme offers them a layer of protection, with the government agreeing to act as a guarantor.
This means if you were to default on your payments and your property was repossessed, your lender would be compensated.
This layer of protection should encourage more lenders to offer 95% mortgages and therefore help more low deposit buyers get on the property ladder.
Can I get a 95% mortgage?
The 95% mortgage guarantee scheme is open to buyers who already own a property, those who don’t but have done in the past and first-time buyers.
In order to be eligible for one of the mortgages under the scheme, you must also:
• Be buying a main residential property – not a buy-to-let or a second home
• Be buying a property with a purchase price of no more than £600,000
• Take out a repayment mortgage
• Have a deposit of between 5% and 9% (LTV of 91% to 95%)
• Pass affordability and credit checks with your lender
Who offers 95% mortgages?
A number of lenders are offering mortgages under the guarantee scheme – with more set to follow.
Those already signed up include:
• Lloyds Bank
• NatWest Bank
• HSBC
• Santander
• Barclays Bank
Types of mortgages available
All lenders offering mortgages under the guarantee scheme must offer buyers a five-year fixed rate product.
This means your mortgage repayments will be fixed for that timeframe – regardless of whether interest rates go up or down.
As well as fixed rate options, other types of mortgage lenders may offer under the scheme include:
• Tracker mortgages – where your interest rate follows the Bank of England base rate and can go up or down
• Discounted rate mortgages – where your interest rate is discounted from your lender’s standard variable rate and can also go up or down
How hard is it to get a 95% mortgage?
Although the mortgage guarantee scheme offers lenders increased protection against losses if you’re unable to repay your mortgage, lenders will continue to use their own affordability tests when assessing you as a buyer.
The more money you’re borrowing, the tighter the affordability is likely to be when assessed against your income, so getting a 95% mortgage can sometimes be tough.
You should always take independent financial advice before deciding to apply for a high loan-to-value mortgage.
Can first-time buyers get a 95% mortgage?
Mortgages under the 95% guarantee scheme are open to first-time buyers.
The majority of buyers applying for the loans are expected to be first-timers, due to them often having smaller deposits.
How much deposit will I need with a 95% mortgage?
When taking out a 95% mortgage under the guarantee scheme, you’ll need to put down 5% of your property’s purchase price as a deposit.
For instance, if the property you’re buying is costing you £150,000, your deposit would be £7,500.
Based on average first-time buyer property prices in the South West and South East, meanwhile, you’d require the following 5% deposit, 95% mortgage and household income amounts*:
| Region | Avg FTB price | 5% deposit | 95% mortgage | Income req* |
| South West | £219,133 | £10,956 | £208,177 | £46,261 |
| South East | £261,122 | £13,056 | £248,066 | £55,125 |
Rightmove data
* Figure based on 4.5 x household income
Further reading…
If you’re moving out of a rental property because you’re buying your own home, there are a host of things you’ll need to do before you leave – we’ve listed everything you need to know here.
And if you are buying your first home, we’ve outlined some of the major do’s and don’ts for first-time buyers.
