A 95% loan-to-value (LTV) mortgage is one where you borrow 95% of the value of the property you're buying.Â
The remaining 5% of the purchase price comes from your deposit, which is why they are sometimes referred to as 5% deposit mortgages.
To get a 95% LTV mortgage, you need a 5% deposit. This could be money you’ve saved up to buy your first home, or, if you’re remortgaging or moving home it could come from the equity in your existing property.
As well as having a 5% deposit, you also need to meet the lender’s eligibility criteria. Typically, this means having a good credit score and proving that you can afford the monthly repayments.Â
Most lenders will only let you borrow up to 4.5 times your monthly salary, and if you’ve got a smaller deposit, they’ll be less likely to offer the maximum amount.
Once you’ve secured a 95% mortgage, you need to make monthly repayments to pay back what you owe, including interest on the loan.
The repayments are calculated based on whether you choose a fixed-rate mortgageÌý´Ç°ùÌývariable-rate mortgage, the deal you secure and the length of the term.
A risk to consider is getting into negative equity. If you have a 95% mortgage and the value of your home suddenly drops, it may be worth less than what you owe on your mortgage.
In this situation, you’re left paying interest on a loan that's bigger than the property's current value.
A 95% mortgage is a popular option for first-time buyers who often can’t afford to save up more than a small deposit.Â
Keep in mind that interest rates on a 95% LTV mortgage won't be as favourable as those on a mortgage with a lower LTV ratio. If you can manage to offer a 10% deposit, you’ll get much better deals.
It’s also worth bearing in mind that some mortgage lenders won't accept first-time buyers even with a 5% deposit, so make sure you check before applying.
If you’re looking to move home, you can use any equity in your existing property plus additional savings for your deposit. If that adds up to 5% of the new property’s value, then you would be looking at a 95% mortgage.
For example, imagine your current house is worth £200,000 and you still owe £175,000 on the mortgage. That means your total equity is £25,000. If your next home was valued at £500,000, your deposit of £25,000 would be worth just 5% and you’d need a 95% mortgage.
If you decided to buy a new house costing £250,000 instead, your deposit would equal 10% and you’d only need a 90% LTV mortgage. This would give you a better range of options and interest rates.
It’s possible to remortgage and get a new 95% LTV mortgage, but it can be hard. Lenders typically prefer you to have more equity in the home when you remortgage. However, if you shop around, you might be able to get a deal.
Generally speaking, interest rates will be high, so you’ll end up with a more expensive deal. If you were previously on a 100% LTV mortgage, moving to a 95% mortgage might be worthwhile as you're likely to get a better rate.
If you’re remortgaging to access the equity in your home – for instance, to finance improvements to the property – you might be better off going for a lower LTV or waiting until you’ve built up more equity.
A 95% mortgage is a popular option for first-time buyers who often can’t afford to save up more than a small deposit.Â
Keep in mind that interest rates on a 95% LTV mortgage won't be as favourable as those on a mortgage with a lower LTV ratio. If you can manage to offer a 10% deposit, you’ll get much better deals.
It’s also worth bearing in mind that some mortgage lenders won't accept first-time buyers even with a 5% deposit, so make sure you check before applying.
If you’re looking to move home, you can use any equity in your existing property plus additional savings for your deposit. If that adds up to 5% of the new property’s value, then you would be looking at a 95% mortgage.
For example, imagine your current house is worth £200,000 and you still owe £175,000 on the mortgage. That means your total equity is £25,000. If your next home was valued at £500,000, your deposit of £25,000 would be worth just 5% and you’d need a 95% mortgage.
If you decided to buy a new house costing £250,000 instead, your deposit would equal 10% and you’d only need a 90% LTV mortgage. This would give you a better range of options and interest rates.
It’s possible to remortgage and get a new 95% LTV mortgage, but it can be hard. Lenders typically prefer you to have more equity in the home when you remortgage. However, if you shop around, you might be able to get a deal.
Generally speaking, interest rates will be high, so you’ll end up with a more expensive deal. If you were previously on a 100% LTV mortgage, moving to a 95% mortgage might be worthwhile as you're likely to get a better rate.
If you’re remortgaging to access the equity in your home – for instance, to finance improvements to the property – you might be better off going for a lower LTV or waiting until you’ve built up more equity.
Lenders won't usually give you a 95% mortgage unless you've got a good credit history.
Offering 95% mortgages is a risky option for lenders, so the more reliable you are as a borrower, the more likely you are to be accepted.
As with any mortgage, lenders will scrutinise your finances closely, including your income, debts and outgoings, before deciding whether you can afford the repayments on your 95% mortgage.
If you are unsure whether you’ll be eligible, it’s worth seeking expert advice from a mortgage broker, who can also help you find the best deal.
At the start of the Covid-19 pandemic, the majority of 95% mortgages were pulled from the market, making choices far more limited. However, the government introduced a new mortgage guarantee scheme on 1 April 2021.
The scheme is designed to encourage lenders to offer 95% mortgages, with the government acting as a guarantor for 15% of the debt if the borrower is unable to repay the loan.
The scheme runs until December 2023, and mortgages must be for residential properties that cost £600,000 or less. Major lenders have launched products under the scheme, including Santander, Barclays, Lloyds, NatWest and HSBC.
The amount you can borrow for any mortgage depends on your personal financial situation and whether you meet the lender’s individual affordability criteria.
Lenders will look at:
Your salary
Other sources of income
Your outgoings
Any debts
Your dependents
Your credit history
Typically, you can borrow around up to four times your salary when you get a 95% mortgage. 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 uses different criteria to decide how much to lend and to whom.
Providing you can afford the monthly mortgage repayment, a 95% mortgage can be a good option. However, saving as much of a deposit as possible will help lower your interest rate and reduce the amount you pay overall.
Find out more ways to save up a mortgage deposit.
When you take out a mortgage, your lender will charge you interest. Whether the interest rate is fixed or variable can affect your monthly payments and how much you'll pay overall.
If you get a fixed-rate mortgage the interest rate remains the same for a set length of time, which means you know how much your monthly repayments will be. These tend to be more expensive at the outset, but you get security in return.
If you get a variable-rate mortgage the interest tracks another financial indicator, most often the Bank of England base rate. The amount you pay each month goes up or down in line with this.
Generally, these deals start off cheaper, but if interest rates go up, you could end up with expensive monthly repayments.
While the return of 95% mortgages to the market was good news for many first-time buyers in the UK, you might find that you're still struggling to save even a 5% deposit and get on the property ladder.
If that's the case, there are some additional schemes you might be able to take advantage of:
Shared ownership - lets first-time buyers purchase a share of the property between 10% and 75% and pay below-market rent on the rest.
Lifetime ISA - encourages first-time buyers (under 40) to save for their deposit by offering a 25% top-up from the government on any amount saved up to £4,000 per year.
Help to Buy Equity Loan -Â (Now closed in England, Scotland and Northern Ireland - but still open to applicants in Wales until March 2025)Â enables first-time buyers to boost their deposit when buying a new-build property.
Learn more about mortgages for first-time buyers.
When you take out a mortgage, your lender will charge you interest. Whether the interest rate is fixed or variable can affect your monthly payments and how much you'll pay overall.
If you get a fixed-rate mortgage the interest rate remains the same for a set length of time, which means you know how much your monthly repayments will be. These tend to be more expensive at the outset, but you get security in return.
If you get a variable-rate mortgage the interest tracks another financial indicator, most often the Bank of England base rate. The amount you pay each month goes up or down in line with this.
Generally, these deals start off cheaper, but if interest rates go up, you could end up with expensive monthly repayments.
While the return of 95% mortgages to the market was good news for many first-time buyers in the UK, you might find that you're still struggling to save even a 5% deposit and get on the property ladder.
If that's the case, there are some additional schemes you might be able to take advantage of:
Shared ownership - lets first-time buyers purchase a share of the property between 10% and 75% and pay below-market rent on the rest.
Lifetime ISA - encourages first-time buyers (under 40) to save for their deposit by offering a 25% top-up from the government on any amount saved up to £4,000 per year.
Help to Buy Equity Loan -Â (Now closed in England, Scotland and Northern Ireland - but still open to applicants in Wales until March 2025)Â enables first-time buyers to boost their deposit when buying a new-build property.
Learn more about mortgages for first-time buyers.
It is possible to get a mortgage with no deposit, but you might have better luck 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 most other mortgages - if you’re still struggling to get on the property ladder, there are schemes to help you buy your first home.
The more you save for a deposit, the more likely you are to be accepted for a mortgage and the better the interest rate you’ll get. There are a few ways to save a deposit for your first home such as:
Setting up a standing order to transfer money to your savings each month
Setting up a Lifetime ISA - this provides a 25% boost on savings if you use the money to buy your first home, but make sure you read the terms and conditions before setting one up
Using money received as a gift* or inheritance
Sticking to a monthly budget
Cutting back on spending where possible
Choosing the savings account that pays the highest interest
* The person who gives you money towards a deposit needs to declare that the money is a gift and not a loan. Inheritance tax rules mean that you could end up facing an inheritance tax bill on this money in certain cases.
Yes, your credit record is important as the more reliable you are as a borrower, the more likely lenders will let you borrow at competitive rates. If your score is low, you may struggle to find a company willing to lend you the money you need.Â
If you have a low credit rating, you might want to consider taking steps to improve it, before applying for a mortgage. Read more about why your credit record matters.
You can work this out by using our mortgage affordability calculator and working out how much you earn and spend each month and comparing what’s left.
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, so it’s important to shop around.
In 2020, near the start of the coronavirus pandemic, many lenders withdrew their 95% mortgage deals from the market. But thanks to a government guarantee scheme introduced in April 2021, it encouraged providers to bring these products back to the market.
There are now several 95% mortgage deals available, including:
NatWest
Barclays
HSBC
Santander
Lloyds
Nationwide
The scheme will run until the end of 2023.
Yes, you should be able to get a 95% mortgage on a new build property. You may also be able to take advantage of first-time buyer schemes such as shared ownership and help to buy equity loans.
The most competitive mortgages tend to be reserved for those with a much higher deposit to put down – usually around 40%.
Even saving up so you have just a 10% mortgage will generally improve the choice of providers and interest rates available to you.
Use the links below to find out about other mortgages
