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Tips for Finding a First Time Buyer Mortgage With a 5% Deposit

All the information you need to apply for a 95% first-time buyer mortgage with confidence - or decide how to leverage your maximum deposit to achieve the best possible rates.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-06-15
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Tips for Finding a First Time Buyer Mortgage With a 5% Deposit

Finding a mortgage as a first time buyer can be confusing, with every lender offering different rates, terms, products and charges - and some are reluctant to lend to first-time buyers at all!

The basic deposit you'll need is at least 5%.

In this guide, Revolution Finance Brokers runs through all the information you need to apply for a 95% first-time buyer mortgage with confidence - or decide how to leverage your maximum deposit to achieve the best possible rates.

How Do 95 Mortgages Work?

In essence, a 95 mortgage means you're borrowing 95% of the property's value (based on the purchase price).

You put down a 5% deposit as a down payment when the sale proceeds and your mortgage lender provides the rest of the financing required to buy your new home.

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Based on your yearly income,
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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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What Does a 95 LTV Mortgage Mean?

LTV stands for Loan to Ratio - it's a phrase you'll commonly see on mortgage calculators, published interest rates and mortgage lender promotions!

The loan to value is the ratio of the amount borrowed compared to the value of the property.

For example, if you bought a house worth £100,000 and borrowed £50,000, your LTV would be 50%. Therefore, a 95 LTV indicates that you put up 5%, and your lender puts up the rest.

What Are the Criteria for Getting a 95 LTV Mortgage?

Every lender has different policies, which is one of the key reasons it helps to have an experienced broker on your side!

These vary, but as a first-time buyer with a relatively low deposit, they'll look at things like:

  • Your credit history and whether you've got a good record of financial responsibility.
  • The property's value and whether they think it's a safe bet.
  • Affordability - how much you earn and how stable your employment is.
  • Your age - most lenders will accept applicants from 18 upwards, but others may have a higher minimum age cap.

If you don't have a strong application, never fear - there are plenty of specialist lenders who will assess each application on a case-by-case basis.

Hence, it's rarely impossible to get a mortgage because you don't meet one of the standard criteria.

However, it's worth knowing that the lowest possible mortgage rates are offered to applicants with a robust deposit of 40% or above, so you may find that first-time buyer interest becomes more expensive with a minimum 5% deposit.

Which Are the Banks Offering 95 Mortgages?

Most banks, building societies, specialist mortgage lenders and financing companies will consider a 95% mortgage - but understanding their policies is another matter!

Applicants with bigger deposits can apply to a broader range of lenders, whereas fewer will accept a 5% deposit, especially if you're a first-time buyer.

That said, if you're spending as much on rent as you would on your mortgage payments and have a 5% deposit saved, there's no reason you can't get your foot onto the property ladder.

After a few years of repayments, many people find that they've built up a bit more equity, so they can likely remortgage onto a more favourable rate at a lower LTV.

Are There 95 Mortgages for First-Time Buyers?

Yes, some lenders have specific products designed for first-time buyers, and you will find that these vary considerably in terms of costs.

The exact monthly repayments will depend on:

  • The value of the property you want to buy.
  • How long a mortgage term you're applying for.
  • What LTV you need to borrow.

Are 95 Mortgages Available Through the Mortgage Guarantee Scheme?

A couple of initiatives can be very useful for first-time buyers, especially if you have a 5% deposit and want to achieve a lower interest rate.

The Mortgage Guarantee Scheme is designed for buyers with a 5% deposit - successful applicants have a guarantee, as the name suggests, substantially reducing the lender's risk.

Anybody can apply - first-time buyer or not - on a purchase worth up to £600,000, and there are lots of participating banks as well as niche providers.

Major banks accepting guarantee scheme applicants include NatWest, Barclays, HSBC and Santander.

We would note that the guarantee doesn't impact the rates you're offered - that's down to the bank you apply to, so it's essential you do your homework!

How Widely Available Are 95 Mortgages UK?

Mortgages at 95% LTV aren't unusual, but they can be harder to come by for first-time buyers, who are usually perceived as a slightly higher lending risk.

The key is to check what the terms are and look at different mortgage structures, not just whether or not your loan will be approved:

  • Fixed-rate mortgages tend to have a two to five year period where your costs are locked in. The benefit is that you know exactly the monthly cost - the downside is that early repayment fees can be extremely expensive if you want to move elsewhere within that time.
  • Variable-rate mortgages are a potential risk if interest rates rise - and it means you won't know your precise monthly cost because base rates fluctuate. The advantage is that if interest rates drop, so too does the cost of your mortgage.

Can I Get a 95 Percent Mortgage With Bad Credit?

Your credit report forms an important part of the lender assessment process. A bank may refuse to lend to any applicant with specific credit issues on their history - such as CCJs, IVAs, repossessions or bankruptcy (although repossession isn't applicable if you're a first-time buyer).

Adverse credit doesn't necessarily mean you can't apply, but it does mean you should be careful about which lenders you select.

Some banks have very strict lending rules, and if you apply to an unsuitable mortgage provider, rejections may be visible on your credit report and make things more difficult.

The best way to approach a first-time buyer mortgage with a 5% deposit and adverse credit is to contact a capable broker who will negotiate terms on your behalf and signpost your application to an appropriate lender.

Are 95 Mortgage Calculators Reliable?

Mortgage calculators are useful tools, but they're only an indication of what you might be able to borrow and what it might cost - they're far from bespoke or accurate!

That's because published mortgage rates are a guide, not an actual offer, and the real rates you get may vary considerably depending on your deposit, affordability assessment and eligibility.

You can contact the Revolution Finance Brokers team at any time if you need clear assistance about the likely costs of your first-time buyer mortgage for a personalised quotation.

Could I Get a 95 Mortgage New Build Related?

New-build mortgages are a little trickier because lenders usually charge a higher interest rate and sometimes demand a larger deposit.

Although you might think that a new-build is a low-risk prospect, lenders feel that, because the property may drop in value very quickly or be sold for an inflated price by a developer, they need a cushion to ensure they wouldn't make a loss in a repossession scenario.

You can get a 95% mortgage on a new-build home but should be conscious that you might end up paying more through interest charges.

How Do the Terms Change on a 95 Mortgage New Build Application?

Terms on new-build mortgages shouldn't be dramatically different from any other first-time buyer mortgage - it's more that the costs may be less attractive!

We always recommend having a close look at comparable offers before you make any decisions.

For example, many lenders roll up fees, enticing first-time buyers with the absence of any upfront payments.

However, you're still paying those costs, and potentially more than through another mortgage provider, so keep an eye on the details!

What Are the Average 95 Mortgage Rates?

It isn't easy to give an accurate idea of the rates you might be offered since this depends so heavily on a range of circumstances.

Recent rises in the base rate inevitably mean that new mortgages are a little more expensive than a few months ago, but last quarter tended to be around the 2.5% mark on two-year fixed-rate deals (plus fees of £1,000 on average).

Five-year fixed-rate mortgages for first-time buyers with a 5% deposit start at roughly 3% - again, plus fees.

How Can I Improve My 95 Mortgage Interest Rates?

There are countless things you can do to make your first-time buyer mortgage application more appealing and improve your rates as a result!

Examples include:

  • Using a mortgage guarantor
  • Applying for the mortgage guarantee scheme
  • Using a Help to Buy equity loan
  • Opting for a joint proprietor, shared ownership mortgage
  • Borrowing a higher deposit
  • Providing a comprehensive application with supporting documentation
  • Improving your credit score (repaying outstanding debts and registering on the electoral roll).

Are There 95 Mortgages Northern Ireland?

Absolutely - UK lenders covering Northern Ireland will often quote on a 95% first-time buyer mortgage, and the mortgage guarantee scheme applies throughout, including NI.

Do 95 Mortgages UK Differ Between Regions?

Interestingly, the location of your home can have a bearing on the type of mortgage you're eligible for and the rates you might pay.

For example, the perceived resale value on a property in central London is likely much higher than in rural Wales, so a lender might be willing to accept more risk because they can't see any difficulty in achieving a sale should they need to.

If you buy a property that is expected to appreciate significantly over the coming years, this might also be a factor.

It's also worth thinking about restrictions on mortgage lending in some parts of the UK - particularly in some regions in the Scottish Highlands.

What Terms Will I Find on a 95 LTV Mortgage First-Time Buyer?

Mortgage terms in the UK are a standard 25 years, but that can be much short or longer!

Fixed-rate deals usually run for two years or five - there are ten year fixed terms, but it's a big gamble given the level of uncertainty.

Depending on how much you're borrowing and your financial circumstances, it may not be advisable.

Can I Get a 95 Mortgage on My First Home?

Saving a 5% deposit may not seem like a huge amount compared to buying a property, but we appreciate that it can take years of diligent effort to reach that level of cash deposit!

You can get a first-time buyer mortgage with a 5% down payment, and many applicants use Help to Buy or the guarantee scheme - although there may be other opportunities that are just as advantageous.

Can You Get a 95 Mortgage at Any Age?

Provided you are over 18; you should be eligible for a mortgage product at 95% LTV.

However, some lenders prefer applicants of 26 or above - it's all about understanding the policies behind the lending decision!

If you're close to retirement age or already retired, it's equally important to work with a professional broker to select lenders who don't have upper age caps or have products designed for older borrowers.

How Can a Broker Help Me Get the Best 95 Mortgages?

We recommend every first-time buyer work with a mortgage - you'll have a much better chance of approval and access to a far larger pool of potential lenders!

Some of our services include:

  • Scouring the whole of the market to find the optimal products for you.
  • Help to compile an application that meets all the edibility criteria.
  • Negotiating rates, costs and terms with your lender.
  • Chasing up progress and dealing with any queries.
  • Suggestions about which products to go for and which present the most cost-effective option.

How to Find a Lender Who Offers 95 Mortgages?

Give our mortgage advisors a call on 0330 304 3040, email via [email protected] or use our contact form for further details about which banks or mortgage lenders are the best matches for your mortgage requirements.

Whether you're using the mortgage guarantee scheme, haven't started looking yet, or need independent support to ensure you make smart decisions, there are plenty of options.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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