What options do I have if I have a low deposit?

Can I get a mortgage with a five percent deposit?

Yes you may be able to get a mortgage. The majority of high street lenders offer 95% mortgages.
We’re in November 2024 at the time of recording this, but just after Covid, lenders cut what they would lend. They wouldn’t lend on high Loan to Value mortgages at 95%. In some cases, they wouldn’t even do 90%, but now these are back.

Some are government sponsored and some are just lender sponsored. So we do have the ability to get you a 95% mortgage, generally without any problems with almost all lenders these days.

What are the requirements of getting a mortgage if I have low income?

If you have a low deposit of 5%, you really need to make sure that your credit file is squeaky clean. You must make sure you’re all up to date – with no missed or late payments. Equally, make sure that all your address verification is correct, so the address on your pay slips match your bank statements and both are correct.

A lender is looking at the risk and the lower deposit you put in, the higher the risk is to them. They want to ensure that everything is absolutely squeaky clean with no issues or problems, as far as all the paperwork is concerned.

With a low income, it’s straightforward – it’s just down to the affordability calculator. We put the information into an affordability calculator and it comes up with what you can borrow.

With some lenders, the larger the income, the bigger the income multipliers. The smaller the income, the smaller those multipliers – so just arrange an appointment with us to find out how much you could potentially borrow, down to the last penny.

There can be a massive difference between what one lender would lend you and how much you can get with another lender. One bank might be able to lend you £80,000, while another might offer you £120,000.

In most cases, whether you have a low deposit, a low income, or both, seeking advice is a good idea to see what Lenders and deals we’ve have access to.

What low deposit schemes are available?

Aside from the 5% deposit mortgages, you could look at shared ownership. This is where you buy a percentage of the property rather than the whole thing. If a property purchase price is £200,000, you might decide to just buy a 25% share.

This is a special scheme – you can’t just buy a share of any property. If you were buying a 25% share of that £200,000 property, that would be £50,000. You would get a mortgage for 95% of £50,000 and pay rent on the other £150,000.

In some cases that works out as very beneficial as you put a significantly smaller deposit down. Income may still be an issue – because you have to cover both the mortgage, which is very small, normally, but also the rent.

So with shared ownership, you’re looking at two figures. It’s not just how much your mortgage is going to be, you’ve got to work out how much the rent is, as well.

Aside from shared ownership, we also have specialist lenders that will lend in some cases more than 95%. One lender will currently go up to 99% Loan to Value, with a minimum deposit of £5,000. That wouldn’t tend to be on a new build property, and in some cases it wouldn’t be on any flats.

These lenders are quite selective around properties, but if everything aligns, it can be fantastic. It’s ideal if you’ve got a good income but you’re struggling with the deposit – and with rents these days, we see a lot of First Time Buyers in this situation.

There’s never a doubt that they can pay the mortgage, but they can’t get one because they don’t have a deposit. So a 1% or £5,000 deposit scheme is great for those people.

Can you get a mortgage with no deposit?

There are no 100% mortgages that I’m aware of at the moment. The closest to it is the 99% that I’ve just mentioned.

That said, there are some other specialist schemes. I’ve got a client who at the moment is buying their council house with Right to Buy. They’ve lived in the property for a number of years, renting it from the council, which means they get quite a large discount when purchasing.

In that particular case, the house is worth just over £200,000 and they’ve got the ability to purchase it for just over £100,000. These particular applicants don’t need to put their own deposit in, because they’ve got plenty of equity as the house is worth over £200,000. In that particular case, the clients are in effect getting a 100% mortgage.

Can my parents lend me money for a house deposit? Can they give me a deposit?

You’re asking two questions there. First, can my parents lend me money? Well, if they’re lending it, it’s repayable, so it will be a loan. Lenders don’t like seeing that.

But if it’s a gift, nearly all lenders will tend to accept that without any problems at all.

The parents would normally complete a form confirming that it is a gift and it’s non-repayable. They state that they’re not living in the property and they don’t have an interest in it.

But I do get a lot of First Time Buyers who say their parents will lend them £10,000 or £20,000. It has got to be a gift. If the deposit is repayable, your solicitor would report that to the lender, and it could affect your borrowing. There’s an important distinction there.

I’ve done this job for many years and gifted deposits were never a thing 10 or 15 years ago. But because property prices are more expensive and rents are more expensive, it is very difficult to save money and pay rent. Gifted deposits from parents, grandparents or brothers and sisters are much more common now.