5% Deposit Mortgages

Getting onto the property ladder with a small savings pot would usually be a challenge for first-time buyers, homeowners and individuals wanting to move house. However, thanks to this month’s budget announcement, this will soon be possible again. The government has introduced a scheme starting from April 1st 2021, that will guarantee mortgages with 5% deposits.

With some of the UK’s biggest lenders already on board, this is an exciting opportunity to become a homeowner quicker than you thought was possible and without having to save beyond what you can comfortably afford.

Key Mortgages can get you started with the new scheme and provide you with a dedicated mortgage adviser who will guide you through the purchase process to completion. Whether you are buying your first home or moving home, we will be able to take away the stress and hard work, giving you more time to plan and prepare for your future.

How do 5% deposit mortgages work?

Under the government's new scheme, first-time buyers, home movers and previous homeowners with a 5% deposit will have access to what is sometimes referred to as a 95% LTV mortgage, LTV standing for ‘loan-to-value’ ratio. This means that the mortgage is for 95% of the property’s market price with the remaining 5% made up of your deposit.

Is this similar to Help to Buy?

The 5% Help to Buy Government-backed mortgage scheme operated between 2013 and 2017 and is similar to the scheme introduced this month. However, it is not limited to just first-time buyers or new-build homes as it was previously with Help to Buy.

Am I eligible for a 5% deposit mortgage?

Government-backed 5% deposit mortgages are not restricted to first-time buyers and can be used by homeowners and homemover too. This opens up the scheme to more buyers with a small deposit.

Here is more of the eligibility criteria:

  • These mortgages cannot be used for second homes or buy-to-let properties, so you must be buying a main home you plan to live in.

  • The property you are purchasing must be worth £600,000 or less, if the property cost exceeds this you will not be able to apply for the scheme.

  • You will need to pass your chosen lender’s normal mortgage affordability criteria.

  • Your deposit must be equivalent to between 5% and 9% of the property's purchase price. That means you will have a mortgage Loan To Value of between 91% and 95%.

  • You must apply for a capital repayment mortgage, meaning that you won't be able to apply for an interest-only mortgage.

Questions & Answers

Which banks are offering 5% deposit mortgages?

Several of the UK's biggest mortgage lenders including Lloyds, Natwest, Santander, Barclays and HSBC have already signed up to take part in the scheme from April. Others expected to follow include Virgin Money.

How can I apply for a 5% deposit mortgage?

It is expected that the application process will be the same as when applying for a standard mortgage. As a mortgage broker, Key Mortgages have access to some of the best mortgage deals and can provide all the information you need to know about the new scheme.

How long will the scheme be running for?

The government's 5% deposit scheme will run from April 2021 until December 2022.