A 95% Loan to Value or 95% LTV mortgage lets you borrow 95% of the value of the property you're buying. The remaining 5% of the purchase price is made up of your deposit.

It is a popular option for first-time buyers who often aren't able to put down more than a 5% deposit. However, your choices will usually be more limited with a 95% mortgage, and interest rates will be higher.

In comparison, the most competitive mortgages tend to be reserved for those with a much higher deposit to put down - usually around 40%.

How do I get a 95% LTV mortgage?

To get a 95% LTV mortgage, you'll need to either save up a 5% deposit (if you're buying your first home) or use the equity in your existing property (if you're remortgaging or moving home).

The equity you have in your current property is the share of it that you already own.

So, for example, if you bought a house for 200,000 and had saved up 10,000 as a deposit (or had 10,000 as equity), your savings would cover 5% of the price. Your mortgage would cover 190,000, which means you'd need a 95% mortgage.

Some people also refer to 95% mortgages as '5% mortgages', but that term is incorrect. A 5% mortgage implies that you'd need to put in 95% of the purchase price as a deposit - which is a lot more money.

What is the mortgage guarantee scheme?

At the start of the Covid-19 pandemic, the majority of 95% mortgages were pulled from the market, making choices for first-time buyers far more limited. Fortunately, however, this could be changing thanks to the launch of a new government-backed mortgage guarantee scheme on 1 April 2021.

The scheme is designed to encourage lenders to offer 95% mortgages again, with the government offering a guarantee, usually of 15%, to compensate lenders if the borrower is unable to repay the mortgage.

The scheme runs until 31 December 2022, and mortgages must be for residential properties that cost 600,000 or less. Major lenders such as Santander, Barclays, Lloyds, NatWest and HSBC have already launched mortgages under the scheme, with more expected to follow suit.

How to choose the right 95% mortgage

To find the right 95% mortgage you'll need to compare your options from as many different 95% mortgage lenders as possible. The easiest way to do this is to use our comparison table above. It includes a whole of market view of 95% UK mortgage deals available.

Make sure you compare both the interest rate and fees that come with each 95% mortgage. You may find that a mortgage with a higher interest rate but lower fee works out cheaper overall, so do the maths carefully.

You can also click on 'check eligibility' at the side of each mortgage in the table to find out if you'll be eligible.

Can I borrow a 5% deposit?

Yes, you can choose to borrow the 5% deposit if you wish, but be aware that any borrowing will show up on your credit report.

Mortgage lenders will take into account any other borrowing when working the amount of mortgage repayments you can afford.

If you are borrowing your 5% deposit from a family member you will still have to declare this as a loan.

Here's how to decide what type of mortgage you should get.

What can 95% mortgages be used for?

You can use 95% mortgages if you're buying your first home, moving home or even remortgaging.

Buying your first home

Some 95% mortgages can be used to buy your first home. Because you only need a small deposit, mortgages like this can be a good option for first-time buyers.

However, keep in mind that 95% LTV mortgage rates won't be as good as rates on a mortgage with a lower LTV. Even if you can manage to save up a 10% deposit, rates for 90% LTV mortgages will be cheaper.

There are a few ways you can try to save a deposit for your first home. You can do all, or a mixture, of the following:

  • Using your existing savings

  • Saving money each month

  • Borrowing from your family or friends

  • Using money given to you as a gift or inheritance

  • Sticking to a monthly budget

  • Cutting back on your spending

  • Spending less on rent

  • Switching your energy bills

  • Choosing the right savings account.

If you are using money given as a gift, bear in mind you will need the person gifting you the deposit to declare this is a gift and not a loan. Inheritance tax rules mean that there is a chance you will end up with an inheritance tax bill.

Here's some more advice on how to save up a deposit.

Note too that even when you've saved your deposit of 5%, some mortgage lenders won't accept first-time buyers, so make sure you check before applying.

Here's how to find a mortgage to buy your first home and check you can afford it.

Moving home

If the outstanding balance on your mortgage is 95% of the cost of the new property you want to buy, you'll need a new 5% deposit mortgage.

For example, if you owe 190,000 on your current mortgage and want to buy a new house for 200,000, you'd need a 95% LTV remortgage. The 10,000 equity in your current home could be used as the 5% deposit on your new mortgage.

Remortgaging

If the outstanding balance on your mortgage is 95% of your home's value, you could get a new mortgage with an LTV of 95%.

The equity in your current home would be used as a 5% deposit on your new home.

Who can get 95 percent mortgages?

Lenders won't usually give you a 95% mortgage unless you've got an excellent credit history. Offering 95% mortgages is risky to lenders, so the more reliable you are as a borrower, the more likely you are to get accepted.

As with any mortgage, lenders will scrutinise your finances closely, including your income, debts and outgoings, before deciding whether you can afford a 95% mortgage and that they are happy to lend to you.

What to consider when choosing a 5 percent deposit mortgage

When you're choosing a 5 percent deposit mortgage, it's worth considering the following:

The interest rate

When you take out a mortgage with a 5% deposit, you'll pay a set amount of interest on your repayments. Whether this rate is fixed or variable can affect your monthly payments and how much you'll pay overall.

If you pay a fixed rate
You agree to the interest for a set length of time, which means you know how much your monthly repayments will be.

If you pay a variable rate
The interest tracks the Bank of England base rate and goes up or down in line with this. This means your monthly repayments can be higher or lower, depending on external economic factors.

The type of mortgage

You can get a repayment mortgage, which is more expensive each month but you are chipping away at the balance. This is the most common type of mortgage.

Or, you can get an interest only mortgage, which is where you just pay off the interest. An interest-only mortgage is cheaper each month, but you don't bring your balance down at all. You'll still owe the full value of the house when your fixed term ends. These are less common and are deemed as riskier by lenders.

The schemes available

As well as the mortgage guarantee scheme, there are a couple of other schemes that can help you buy a home with a small deposit if you're a first time buyer.

These include the Help to Buy Equity Loan scheme (for new-build properties in England only) and Shared Ownership. With Shared Ownership, you buy a share of the property and pay rent on the share that you don't own.

How much can I borrow through a 95% mortgage?

The amount you can borrow through a 95% mortgage - or any mortgage - depends on your personal situation. Lenders will look at:

  • Your salary

  • Your income

  • Your outgoings

  • Your credit history

Usually you'll be able to borrow around three or four times your salary when you get a 95 percent mortgage, UK wide. It might be a bit less than this if you're getting a mortgage with someone else and basing it on two incomes.

Remember that every mortgage lender has different criteria to help them decide how much they'll lend and who they'll lend to.

Are 95% mortgages best for first time buyers?

Providing you can afford the monthly mortgage repayment, a 95% mortgage can be a good option for first time buyers. However, saving as much of a deposit as possible will help lower your interest rate and reduce the amount you pay overall. Always try to choose a repayment mortgage if you can.

Are there any disadvantages with 95% mortgages?

Getting a 95% mortgage isn't risk free, unfortunately.

One of the biggest risks is getting into negative equity. If you had a 95% mortgage and the value of your home suddenly dropped, it could be worth less than what you owe on your mortgage. You'd suddenly be left paying interest on a loan that's bigger than what the property's currently worth.

The other thing to look out for is that 5% deposit mortgages don't usually offer the best mortgage interest rates. It's usually the case that the bigger the deposit you put in, the better the mortgage deal you're offered.

As with any mortgage, if you don't make the repayments, your home could be repossessed. So it's worth being aware of this risk if you're considering taking out any mortgage at all.

95% mortgage FAQs

Q

Can I get a mortgage without a deposit?

A

It is possible to get a mortgage without a deposit, but only if you have a guarantor. This is someone (such as a family member or friend) who uses their home or savings as collateral to cover the mortgage if you can't.
You need at least a 5% deposit for all other mortgages, but some come with schemes to help you buy your first home.

Q

How can I save a deposit?

A

The more you save for a deposit, the more likely you are to get accepted for a mortgage and the less you're likely to pay in interest. Take a look at our guide for tips on how to save up for a deposit.

Q

Does my credit record matter?

A

Yes, your credit record does matter as the more reliable you are as a borrower, the more likely lenders will let you borrow at competitive rates. Read more about why your credit record matters.

Q

Can I afford a mortgage?

A

Before applying for a mortgage, it's crucial that you check whether you can afford it. You can check if you can afford a mortgage by working out how much you earn and spend each month and comparing this to how much buying a home will cost you.

Q

What is a higher lending charge?

A

Some lenders add a fee of around 1.5% of the mortgage amount if your deposit is less than 10%. This is known as a higher lending charge. Not every lender charges this as a separate fee, however.

About our mortgage comparison

Q

Who do we include in this comparison?

A

We include mortgages from every lender in the UK. They are all from lenders regulated by the Financial Conduct Authority. Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.
You do not pay any extra and the deal you get is not affected.

Last updated: 10 May, 2021