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What is a 95% mortgage?


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Last updated Thursday 18th March 2021

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They disappeared during the pandemic but they're now back on the market - it’s the 95% mortgage. Whether you’re looking for a way of purchasing your first home or want to upgrade to a new place, this mortgage can help you reach those goals without breaking the bank. However, as with all mortgages, there are risks and rules to bear in mind.

Here’s everything you need to know about 95% mortgages…

What is a 95% mortgage?

First things first - a 95% mortgage is a type of mortgage that allows you to borrow 95% of the property price from a lender. The remaining 5% is covered through your deposit.

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How are these mortgages now available?

The UK Government will be introducing a new scheme to incentivise lenders to reintroduce 95% mortgage deals from April 2021. These types of mortgages have been available previously but the number of 95% mortgage products has largely decreased during the pandemic.

The new mortgage guarantee scheme will see the UK Government act as a safety net for lenders. In the worst case scenario, if or where the property is repossessed and sold at a loss, the Government will take on some of the losses incurred by the lender. In return, lenders will have greater incentive to offer 95% mortgage products to people looking to buy a new home, as they’ll carry less risk.

What do I need to know?

There are a few things you should know about the new scheme:

  • It will launch from April 2021
  • You can purchase properties up to £600,000 with a 5% deposit
  • It’s open to all homebuyers (not just first time buyers)
  • Normal mortgage affordability checks will still be in place (a mortgage adviser will help with this)

Can I now get a mortgage?

This all depends on your individual circumstances and affordability, which can be assessed by an expert mortgage adviser. However, as you now only require a 5% deposit for a 95% LTV mortgage, many prospective homebuyers could find they have enough to buy their first property.

For example, let’s say you were aiming to buy a home for £200,000 through a 90% LTV mortgage. Your deposit would have been £20,000.

With a 95% LTV mortgage, your deposit could be as low as £10,000. You could even use savings from a Lifetime ISA to put towards your deposit.

These mortgages could also mean that if you had a larger deposit saved, you might now be able to increase your budget when looking for your new home. Or it could mean that you could take on a project property and use the rest you’ve saved to transform it into your dream home!

Would you like to find out whether a 95% mortgage product is right for you? Or maybe just fancy a chat to discuss your options? We’re always here to help. Feel free to get in touch and contact us today.

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See how much you can borrow

Get an indicative idea of your borrowing potential by answering the simple questions below


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