Everything You Need To Know About 5% Deposit Mortgages

Published 15 October 2026

The below article has information contained within that was correct at the time of publication but is subject to change. This is for information purposes only and does not constitute advice.

Everything You Need to Know About 5% Deposit Mortgages

Written by Doug Miller, Director at Lansdown Financial Services.

Doug Miller is a mortgage broker and co-founder of Lansdown Financial Services, based in Bath, quoted in 30+ news articles including the Guardian, Sky News, This is Money and the Sun.

Saving a deposit is often one of the biggest challenges when buying a home.

The good news is that you don’t necessarily need a 10%, 15% or 20% deposit before you can get a mortgage.

Some lenders offer mortgages with deposits as small as 5%, meaning you could potentially borrow up to 95% of the property’s value.

For example, buying a £250,000 home with a 5% deposit would mean contributing £12,500 yourself and borrowing the remaining £237,500.

We regularly speak to first-time buyers who assume they need to keep saving before they can even consider buying. Sometimes that’s the right approach, but in other cases they already have enough deposit to explore their mortgage options.

The important question isn’t simply whether you have a 5% deposit. It’s whether the mortgage is affordable and appropriate for your circumstances.

Key Points: The Short Version

Don’t have time to read the full article? Here are the six key things you need to know.

• You can buy a property with a 5% deposit: Eligible borrowers can access 95% loan-to-value mortgages, subject to affordability and lender criteria.
• You don’t have to be a first-time buyer: Some 95% mortgages are also available to home movers with limited equity.
• Mortgage rates can be higher: Borrowing 95% of a property’s value may mean paying a higher interest rate than someone with a larger deposit.
• The Mortgage Guarantee Scheme supports 95% lending: The permanent government-backed scheme helps participating lenders offer qualifying low-deposit mortgages, but it doesn’t guarantee approval.
• The property matters: Some lenders restrict 95% mortgages on new-builds, flats and certain other property types.
• Don’t forget the risks and additional costs: You’ll need money for legal fees, surveys and moving expenses, and a smaller deposit leaves less protection against falling property values.

The bottom line: Having a 5% deposit doesn’t automatically mean you’re not ready to buy. It means it’s worth finding out how much you could borrow, what the repayments would cost and whether buying now makes more sense than continuing to save.

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The Full Guide: How 5% Deposit Mortgages Work

Want to understand the detail? Below, we explain how 95% mortgages work, who can qualify, how lenders assess affordability and what to consider before buying with a smaller deposit.

In This Guide

• What a 5% deposit mortgage is
• How much deposit you’ll need
• Who qualifies for a 95% mortgage
• The Mortgage Guarantee Scheme
• Mortgage rates and affordability
• Gifted deposits and Lifetime ISAs
• New-build properties and valuations
• The risks of buying with a smaller deposit
• Whether you should save more
• Frequently asked questions

What Is a 5% Deposit Mortgage?

A 5% deposit mortgage allows you to purchase a property using a deposit equivalent to 5% of its purchase price.

The mortgage lender provides the remaining 95%, subject to its lending criteria.

These products are commonly called 95% loan-to-value mortgages, or 95% LTV mortgages.

Loan-to-value is simply the percentage of the property’s value you’re borrowing.

For example, if you’re purchasing a property for £200,000 with a £10,000 deposit, you’d need a mortgage of £190,000.

That’s a 95% LTV mortgage.

How Much Deposit Do You Need?

Property price	5% deposit	Mortgage required
£200,000	£10,000	£190,000
£250,000	£12,500	£237,500
£300,000	£15,000	£285,000
£350,000	£17,500	£332,500
£400,000	£20,000	£380,000

Illustrative examples assuming the lender accepts the purchase price as the property value and agrees to lend 95%. Actual mortgage availability depends on affordability, property eligibility and lender criteria.

Having enough deposit doesn’t automatically mean a lender will offer you the remaining 95%.

You’ll also need to demonstrate that the mortgage repayments are affordable.

Can You Really Buy a House with a 5% Deposit?

Yes. 5% deposit mortgages are available from a range of UK mortgage lenders.

They can be particularly helpful for buyers who have sufficient income to afford mortgage repayments but haven’t managed to save a larger deposit.

For example, you may have a stable income and be comfortable with the cost of a mortgage, but saving tens of thousands of pounds while paying rent could take several years.

A 95% mortgage may allow you to buy sooner.

However, buying earlier isn’t automatically the right decision.

The mortgage needs to remain affordable, and you’ll need sufficient money for the other costs of purchasing and owning a property.

Are 5% Deposit Mortgages Only for First-Time Buyers?

No.

Although 95% mortgages are particularly popular with first-time buyers, some lenders also offer them to existing homeowners moving property.

For example, you may already own a property but have relatively little equity available after selling it.

You could potentially qualify for a 95% mortgage on your next home, depending on the lender and your circumstances.

Individual mortgage products may have different eligibility requirements for first-time buyers and home movers.

What Is the Government Mortgage Guarantee Scheme?

The government introduced a new permanent Mortgage Guarantee Scheme in July 2025 to support the availability of mortgages for borrowers with smaller deposits.

The scheme covers qualifying mortgages at loan-to-value ratios above 90% and up to 95%.

Under the arrangement, the government provides participating lenders with a guarantee covering part of their potential losses on eligible mortgages.

This is designed to encourage lenders to continue offering high loan-to-value mortgage products.

However, there’s an important distinction.

The government guarantee protects the mortgage lender, not the borrower.

You remain responsible for the full mortgage balance and repayments.

The guarantee doesn’t mean your mortgage application will automatically be approved.

You’ll still need to satisfy the lender’s affordability, credit and property requirements.

You also don’t necessarily need a mortgage supported by the government scheme to buy with a 5% deposit.

Lenders can offer their own 95% mortgage products outside the scheme.

From your perspective, the most important consideration is whether the mortgage offers suitable terms at a competitive overall cost.

How Much Can You Borrow with a 5% Deposit?

Your deposit and borrowing capacity are two different things.

This is something that can catch buyers out.

Imagine you’ve saved £15,000.

Mathematically, that’s a 5% deposit on a £300,000 property.

But it doesn’t automatically mean a lender will provide the £285,000 mortgage you would need to purchase it.

The lender will assess factors including:

• Your income and how it’s earned.
• Existing loans, credit cards and other commitments.
• Regular household expenditure.
• Your credit history.
• The proposed mortgage term.
• The property you’re purchasing.

Different lenders have different affordability calculations.

One lender may be willing to offer a larger mortgage than another based on exactly the same circumstances.

That’s why we’d recommend understanding your borrowing potential before setting your property budget.

There’s little point concentrating on £300,000 properties if your available deposit and realistic mortgage borrowing only support a £250,000 purchase.

Are Mortgage Rates Higher with a 5% Deposit?

They can be.

Mortgage lenders generally price their products according to loan-to-value bands.

A 95% mortgage represents a higher level of lending relative to the property’s value than a 90%, 80% or 60% mortgage.

As a result, mortgage rates at 95% LTV may be higher than those available to borrowers with larger deposits.

You may also find that fewer products or lenders are available.

However, this doesn’t automatically mean a 5% deposit mortgage is a poor choice.

The question is whether the additional borrowing cost is worthwhile compared with waiting to save a larger deposit.

Is a 5% or 10% Deposit Better?

A larger deposit generally reduces the mortgage balance and can improve the range of products available.

For example, consider a £250,000 property.

Deposit	Deposit amount	Mortgage required	Loan-to-value
5%	£12,500	£237,500	95%
10%	£25,000	£225,000	90%
15%	£37,500	£212,500	85%

Increasing your deposit from 5% to 10% reduces the mortgage amount by £12,500 and may give you access to different interest rates.

However, we’d be cautious about using every penny of your savings purely to reach the next LTV band.

If putting down a 10% deposit leaves you without money for legal fees, repairs or emergencies, that needs to be considered.

At Lansdown Financial Services, we can compare both scenarios and explain the actual difference in monthly repayments and mortgage costs.

You can then make an informed decision based on your finances.

Can Your Family Help with a 5% Deposit?

Yes, potentially.

Gifted deposits from parents and other family members are common, particularly among first-time buyers.

Some lenders allow family members to provide part or all of the deposit, subject to their requirements.

However, lenders generally want to establish where the money has come from and whether it is a genuine gift rather than a loan that needs repaying.

Your solicitor will also need to complete appropriate source-of-funds checks.

Different lenders have different rules about who can provide a gifted deposit and what supporting documentation is required.

If family members are helping you buy, it’s worth explaining the arrangements to your mortgage adviser before applying.

That way, we can consider suitable lenders from the outset.

Can You Use a Lifetime ISA Towards a 5% Deposit?

Potentially, yes.

A Lifetime ISA can help eligible first-time buyers save towards their first home.

Under the current rules, the government adds a 25% bonus to eligible contributions of up to £4,000 each tax year.

That means you could receive a government bonus of up to £1,000 per tax year.

However, there are important conditions.

To use the funds towards a qualifying first-home purchase without the usual withdrawal charge:

• The property must cost £450,000 or less.
• At least 12 months must have passed since your first contribution.
• You must be purchasing with a qualifying mortgage.
• The property must be intended as your main residence.
• The withdrawal must be handled through your solicitor or conveyancer.

If you withdraw funds for a non-qualifying reason, a 25% withdrawal charge will normally apply.

If you’re planning to use a Lifetime ISA as part of your mortgage deposit, tell your adviser and solicitor early.

You can find more detail in our First-Time Buyer Schemes Explained guide.

Can You Get a 5% Deposit Mortgage with Bad Credit?

Potentially, depending on the circumstances.

You don’t necessarily need a perfect credit history to obtain a mortgage, but lender criteria can be more restrictive at higher loan-to-value ratios.

When you’re borrowing 95% of the property’s value, lenders have less equity as protection if the property has to be sold following a default.

They may therefore apply more restrictive credit requirements.

However, an old missed payment doesn’t automatically mean you’ll be declined.

The type of credit issue, how long ago it occurred and your subsequent financial conduct can all be relevant.

We’d recommend checking your credit reports and speaking to a mortgage adviser before submitting applications if you’re concerned about your credit history.

Can You Get a 5% Deposit Mortgage If You’re Self-Employed?

Yes, potentially.

Being self-employed doesn’t automatically mean you need a larger deposit.

However, the lender will need to establish your income and affordability.

If you’re a sole trader, lenders will generally consider your net profits.

If you’re a limited company director, they may assess your salary and dividends or, with some lenders, eligible company profits.

Your trading history can also influence which products are available.

Not every lender offering 95% mortgages will necessarily accept every self-employed income arrangement.

This is why choosing a suitable lender is particularly important.

For further detail, read our guide: Self-Employed? How Lenders Assess Your Income.

Can You Get a 5% Deposit Mortgage on a New-Build Property?

Potentially, but lender criteria can be more restrictive.

Some mortgage lenders apply different maximum loan-to-value limits to newly built houses and flats.

For example, a lender offering 95% mortgages on existing houses may have a lower maximum LTV for certain new-build flats.

The lender’s definition of a new-build property can also vary.

Property type, construction and other characteristics may affect eligibility.

If you’re considering a new-build property, we’d recommend checking which lenders could support the purchase before paying a reservation fee.

Don’t assume that a lender offering 95% mortgages generally will automatically lend 95% on every property.

What Happens If the Mortgage Valuation Is Lower Than the Purchase Price?

This can be particularly important when buying with a small deposit.

Imagine you agree to purchase a property for £300,000 using a £15,000 deposit.

You would need a £285,000 mortgage.

However, the lender’s valuation comes back at £290,000 rather than £300,000.

If the lender bases its maximum 95% mortgage on that valuation, it may only lend up to £275,500.

Property details	Amount
Agreed purchase price	£300,000
Your original deposit	£15,000
Mortgage initially required	£285,000
Lender’s valuation	£290,000
Maximum 95% mortgage on valuation	£275,500
Cash required at original purchase price	£24,500

Illustrative calculation assuming the lender uses the lower valuation for its LTV assessment and that all other lending requirements are satisfied.

In this example, you’d need an additional £9,500 to proceed at the original purchase price.

Alternatively, you might need to renegotiate the purchase price or reconsider your mortgage options.

This illustrates why having some additional savings available can be particularly helpful when purchasing with a small deposit.

What Is Negative Equity?

Negative equity occurs when your outstanding mortgage balance is greater than the value of your property.

It’s a greater potential risk when buying with a 5% deposit because you’re starting with relatively little equity.

For example, imagine you purchase a home for £250,000 with a £12,500 deposit and a £237,500 mortgage.

If the property’s value subsequently falls to £225,000 while the mortgage balance remains at £237,500, you’d have £12,500 of negative equity.

In practice, the mortgage balance on a repayment mortgage should gradually reduce as you make payments, but falling property prices can still create problems.

Negative equity doesn’t necessarily create an immediate issue if you can comfortably maintain your repayments and aren’t planning to move.

However, it can make selling the property or switching mortgage lenders more difficult.

It’s an important risk to understand before committing to a high loan-to-value mortgage.

Should You Wait Until You Have a Bigger Deposit?

Maybe, but don’t automatically assume that’s the best option.

If you’re only a few months away from reaching a 10% deposit and that would provide access to significantly better mortgage products, waiting could make sense.

However, if saving another 5% will take several years, the calculation becomes more complicated.

During that period, you may continue paying rent, while house prices and mortgage rates could change.

Nobody can predict exactly what the property or mortgage market will do next.

We’d recommend comparing your realistic options rather than relying on forecasts.

Buying with 5% vs Waiting for 10%

Buying with a 5% deposit	Waiting for a 10% deposit
May allow you to purchase sooner.	Requires more savings before buying.
Usually involves a larger mortgage balance.	Reduces the amount you need to borrow.
May have higher mortgage rates.	May provide access to more competitive products.
Leaves less initial equity in the property.	Provides a larger initial equity position.
Allows you to stop waiting to purchase.	Provides more time to build savings and review your finances.

The right choice depends on how much more you need to save, the mortgage rates available and whether the monthly repayments would be comfortable.

Don’t Forget the Other Costs of Buying

Your deposit isn’t the only money you’ll need.

There can also be legal fees, property surveys, mortgage product fees, insurance and moving expenses.

Depending on the property price, location and your circumstances, Stamp Duty or another property transaction tax may also apply.

Once you’ve moved in, you’ll probably want some money available for furniture, decorating, repairs and other unexpected costs.

We’d therefore recommend budgeting for the entire purchase rather than concentrating exclusively on reaching a 5% deposit.

Frequently Asked Questions About 5% Deposit Mortgages

Can I Get a Mortgage with Just a 5% Deposit?

Yes, potentially.

A range of lenders offer 95% LTV mortgages, allowing eligible buyers to purchase with a deposit equivalent to 5% of the property’s value.

However, the lender will still assess affordability, credit history and property eligibility.

Are 95% Mortgages Only Available Through the Government?

No.

Some lenders offer 95% mortgages independently of the Mortgage Guarantee Scheme.

The government-backed scheme is designed to support the availability of qualifying low-deposit products, rather than provide the only route to a 95% mortgage.

Is It Harder to Get a Mortgage with a 5% Deposit?

It can be.

Some lenders apply more restrictive affordability, credit or property criteria at 95% LTV.

However, having a 5% deposit doesn’t automatically mean you’ll struggle to obtain a mortgage.

The outcome depends on your circumstances and the lender.

Can I Move House with Only 5% Equity?

Potentially, yes.

Some 95% mortgages are available to existing homeowners moving property.

However, your available equity, sale costs, mortgage affordability and the type of property you’re purchasing will all need to be considered.

How Lansdown Financial Services Can Help

Having a 5% deposit doesn’t necessarily mean you need to put your plans to buy a home on hold.

At Lansdown Financial Services, we’ll start by establishing whether your deposit is sufficient for the type of property you want to purchase and how much you could realistically borrow.

We’ll look at your income, existing commitments, credit history and wider circumstances before comparing suitable mortgage products.

If increasing your deposit from 5% to 10% could make a meaningful difference to the mortgages available, we’ll explain that too.

Whether you’re a first-time buyer or moving to another property, our award-winning mortgage advisers can help you understand your borrowing options, likely monthly repayments and the overall costs involved.

As a free, whole-of-market mortgage adviser with access to more than 70 lenders, we provide straightforward, personalised mortgage advice without the jargon.

Saved a 5% deposit and wondering whether you’re ready to buy?

Contact Lansdown Financial Services or call 01225 459515 to speak to one of our award-winning mortgage advisers for free, expert mortgage advice.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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About the Author

Written by Doug Miller, Director at Lansdown Financial Services.

Doug Miller is a mortgage broker and co-founder of Lansdown Financial Services, based in Bath, quoted in 30+ news articles including the Guardian, Sky News, This is Money and the Sun.