Mortgages With a Low Deposit

illustration of Mortgages With a Low Deposit

When it comes to getting a mortgage, the amount you’ll be able to borrow will depend on a few different things. This includes how much money you can put down up front, known as a deposit. But saving for a big deposit isn't always possible for a lot of people.

In this Guide, you’ll find all you need to know about mortgage deposits and what your options are if you can’t save a lot of money.

Can I get a mortgage with a low deposit?

It’s possible to get a mortgage with a small deposit, but it will depend on your individual circumstance and what your Loan to Value ratio (LTV) is.

LTV tells you what percentage of your mortgage is a loan, compared to how much the property you’re buying is worth. For instance, if you have a 10% deposit, then you’ll need a 90% LTV mortgage. If you have a 15% deposit, then you’ll need an 85% LTV mortgage and so on.

Your LTV directly impacts which mortgage rates you’ll get. Generally, the higher your LTV then the higher your interest rate will be. This is because there’s more of a risk to lenders when you borrow a lot of money. They’re investing in your property, and there’s a risk that your home could decrease in value, making for a bad investment. 

Getting a mortgage with a small deposit is definitely possible, but you’ll have fewer options than if you had a bigger deposit. If you need a mortgage but don’t have a lot of money to put down upfront, it’s a good idea to work with a specialist mortgage broker

Our advisors live and breathe the mortgage market - they’ve seen it all. They’ll know which lenders are most likely to accept you, and will make your application look as attractive as possible. Make an enquiry to get matched to the right broker for you.

Can I get a mortgage with a low deposit and bad credit?

Some high street banks will ask you to have a bigger deposit if you have bad credit. However, there are specialist lenders offering bespoke mortgages for people with bad credit scores. These mortgages are underwritten especially for you and your unique circumstances. Specialist lenders consider people on a case-by-case basis, and are experts in providing tailored mortgages for people with complex financial history.

Mortgages from specialist lenders aren't usually available directly to you as a borrower - you need to go through a specialist mortgage broker.

A specialist mortgage broker can find the right mortgage for you at the best rates, and prepare your application so it looks as good as possible to a lender. If you're worried about bad credit affecting your mortgage deposit, get in touch to get matched with an advisor

Can I get a mortgage with a low deposit if I’m self-employed?

A lot of mortgage lenders aren't set up to deal with earnings that aren’t the typical 9-5. Because your income isn't as straightforward it can be harder to verify. You might be asked to put down a larger deposit as a self-employed person. 

A specialist mortgage broker can find the right mortgage with your current deposit, and prepare your application so it looks appealing to a lender. The brokers we work with are experts at finding mortgages for self-employed people, including freelancers and contractors. Get matched to a broker by making an enquiry.

Can I get a Buy to Let with a low deposit?

Probably not. You usually have to put down a minimum deposit of 25% on a Buy to Let mortgage. A lender needs to know if you can afford the extra costs. If you’re thinking about Buy to Let, putting down a bigger deposit will unlock the better interest rates. Read how Buy to Let mortgages are different from other mortgages.

Can I get a mortgage without a deposit?

Not at the moment. Mortgages without a deposit - known as 100% mortgages - are not common at all. Some specialist lenders may occasionally offer them. But at the moment, there are no 100% mortgages on the market. 

You’d probably need to have a perfect credit history to be considered if they ever do come back on the market. And they’re likely to only come onto the market in times of very strong national financial stability. 

If you don’t have a deposit and need a mortgage, you could consider a guarantor mortgage. This is where someone legally agrees to pay your mortgage if you can’t. This is a serious commitment - your guarantor could potentially lose their home if payments aren’t made. 

100% mortgages are risky for lenders, and if you're a first time buyer then you probably won't be approved, because lenders can’t look at your past mortgage repaying behaviour. If 100% mortgages come back on the market, you’ll probably have to pay much higher interest rates than a mortgage with a deposit. 

What’s the minimum amount of deposit I need for a mortgage?

Because of COVID-19’s financial impact, mortgage lenders aren’t offering mortgages with less than a 10% deposit at the moment. For example, if you want to buy a property worth £200,000, the minimum amount of deposit you’ll need is 10% of £200,000 which is £20,000. 

The global pandemic has made everything very uncertain – many people have lost their income and because of this, the UK economy is in a recession. 

Whenever the country experiences a recession, mortgage lenders have to protect themselves in whatever way they can from offering loans to people who may not be able to pay them back. That’s why mortgage lenders aren’t offering 5% deposits at the moment. They’re trying to reduce the risk of lending to people by asking for larger deposits up front. 

When the economy is healthy, lenders can be more flexible. Once our global and national economy recovers, it’s likely smaller deposit mortgages will become available again. 

Read more in our Guide: How is the Coronavirus Pandemic Affecting Mortgages?

Can I get a mortgage with a 5% deposit?

Currently, the only way to get a mortgage with a 5% deposit is through the government’s Help to Buy scheme - available to first time buyers only. 

The mortgage market changes all the time, so it’s possible you could get a mortgage with a 5% deposit in the future if these mortgages come back on the market. But at the moment, Help to Buy is the only route with a 5% deposit. 

Help to Buy provides you with a government loan to put towards the cost of a new build home in England. The loan ranges from 5-20% of the property value (40% in London), and you'll need to purchase your home from a registered Help to Buy homebuilder. 

Help to Buy isn’t available in Northern Ireland, and the Scottish and Welsh schemes work slightly differently from the English version. Read more in our Guide: Help to Buy Explained

The good thing about an equity loan to buy your first home is that you won’t need to borrow as much on a mortgage. Meaning you could get cheaper rates than if you were otherwise taking out a 95% LTV mortgage. 

The downside is that a lot of good mortgage deals aren’t accessible to you if you’re using Help to Buy. It’s still possible to get a good rate, you’ll just need some advice from a mortgage broker who has experience with Help to Buy. A specialist broker knows the whole of the market, and will know how to get the best deal. If you’re considering Help to Buy and want to know your options, make an enquiry to get matched to a broker. 

Mortgage options if you can’t save a big deposit

If you’re ready to be a homeowner but are concerned about having a low deposit, there are a few options available to help you:

Explore Shared Ownership

Shared Ownership is where you buy part of a property and rent the rest. You take out a mortgage on the bit you're buying, then pay a reduced rent on the bit you don't own. You’re able to buy between 25-75%, and can buy some or all of the remaining share when you can afford to. 

This means you only need to put a deposit down on the bit that you’re buying, rather than the cost of the whole home. Read more about Shared Ownership.

Consider Right to Buy

If you’re a council tenant in England, you could be eligible to purchase your home through the Right to Buy scheme. Right to Buy lets you buy your council home for a discounted price -  most lenders will then accept your discount in place of a deposit. Read more about Right to Buy. 

Ask a family member to gift you a deposit

If you’re struggling to save for a deposit but have family that can help, then you could look at using a gifted deposit. You can’t technically ‘borrow’ a deposit from a family member, but it can be ‘gifted’. 

Lenders will want to know that you won’t have to pay back a deposit on top of your other outgoings. You might have to provide written evidence, signed by the person giving the deposit money to you. 

Get a guarantor mortgage

If you’re struggling to save for a deposit, you could apply for a guarantor mortgage. A guarantor mortgage is where someone else agrees to pay your mortgage if you can’t. 

The person that you ask to be your guarantor won't own any share of your property, they’re just agreeing to pay if you can’t. It's not something to take lightly - if you can’t make your repayments then your guarantor could lose their home. The person you ask should be someone you trust, and someone who’s financially secure.

Look into buying with friends

Buying a house with friends or a family member is becoming a popular way to get on the property ladder. Combining deposits and sharing all the monthly living expenses can be  appealing. 

It’s a big commitment though - you'll be jointly responsible for the mortgage payments. If one of you can't pay, you'll have to cover the cost. You also can't sell the property unless everyone on the mortgage agrees.

Mortgage advice for low deposits

If you need a mortgage but have a low deposit, it’s a really good idea to work with a specialist mortgage broker. A qualified mortgage advisor will have access to the lenders who’ll look at your application and consider your unique circumstances. They’ll help you through the entire journey, from application right through to completion. They know the market, and will make your application look as appealing as possible to lenders. Get started.

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