Getting A Low Deposit Mortgage (2024)

Author:Pete Mugleston

Mortgage Advisor, MD

Updated: December 4, 2023

If you’re in the process of saving up to buy a house and struggling to reach your initial goal because of rising prices, or for any other reason, you might be wondering if it’s possible to get a mortgage with a low deposit.

This guide covers everything you need to know about how to buy a house with a small deposit. We’ll explain the minimum percentages, available government schemes, and how you can still get the best possible deal.

Keep reading for all the details or click on a link below to jump straight to a section…

Can you get a mortgage with a low deposit?

Yes, this is definitely possible. And, with house prices going up significantly over the last few years, a mortgage with low deposit requirements is necessary for many UK home buyers. However, your choice of competitive borrowing options will be smaller, so finding the best low deposit mortgages often requires expert guidance from a skilled advisor.

What is the lowest deposit you can get approved with?

The lowest deposit you’ll need for a mortgage in the UK is 5%. This means saving up for at least 5% of the property’s value that you’re hoping to buy, leaving you with a loan-to-value (LTV) ratio of 95%. But, even though 5% is the minimum percentage deposit for a mortgage, not every lender will offer this and there can be other rules and requirements to meet.

There can be creative ways to get a mortgage with little or no deposit. But it’s best to discuss these methods with an expert broker. They’ll be able to recommend relevant options based on your individual circ*mstances.

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Options you could consider

If you’re looking to get a mortgage with the lowest deposit possible, you have a few options to explore. Here are some of the main ways to buy a house with a low deposit:

First-time buyer: if you happen to be a first-time buyer (FTB), it’s more likely you’ll be offered a mortgage with a low deposit. The bulk of 95% LTV mortgage products are aimed at FTBs. The Help to Buy scheme has helped many first-time buyers onto the property ladder, but the deadline to apply passed on 31st October 2022.
Gifted deposits: some lenders will let you use gifted deposits from family members. But, you may be offered higher rates and very few will accept third-party deposit gifts (from outside your family).
Guarantor mortgages: if you’re struggling to save for a deposit, guarantor mortgages (sometimes known as a family-assisted mortgage) can allow a family member to act as a guarantor for the mortgage and make payments if you don’t.
Springboard mortgage: instead of a deposit, a springboard mortgage allows your family to put money in an account with the lender and if you keep up with the mortgage repayments, they get their money back plus interest after 3 years.
Right to Buy: this is an old scheme that allows you to buy your council house at a discount. Often, you can make a purchase with a low deposit and sometimes it’s even possible to use Right to Buy with zero deposit.
Concessionary purchases: If you get a discount on the true market value of a house, some lenders will let you use the discounted sum as a form of deposit. For example, your property purchase is discounted by 5% and you can then use this as part of your deposit. These are known as concessionary purchases
Government schemes: can change from year to year, but recently the UK launched a low deposit mortgage scheme. It’s called the ‘mortgage guarantee scheme’ and was created to increase the number of small deposit deals available with major lenders who agreed to participate.

How to get a mortgage with a small deposit

Your first step should be to find a specialist mortgage broker who has experience arranging mortgages for people with a low deposit as this will boost your chances of getting approved at the best terms available.

Using our free broker-matching service you can speak straight away to the right broker by simplymaking an enquiry online.They’ll be able to help with:

Readying all the necessary paperwork
Downloading your credit reports
Finding the right lender and securing the best deal for you

Low deposit buy-to-let (BTL) mortgages

The process of getting a mortgage with a lower deposit will work differently if you’re planning to purchase a buy-to-let (BTL) property. Typically, BTL properties require a higher deposit than residential mortgages.

But, if you’re struggling to get the necessary deposit to put down, there can be other ways to get a competitive BTL mortgage with a small deposit, this could involve:

Using a favourable repayment vehicle.
Proving the viability of the investment with high forecast rental income.
Improving your credit rating.
Demonstrating your previous experience as a successful landlord
Using equity from any properties you already own to drop up your deposit funds

Options for borrowers in Scotland

Another reason it’s worth using the services of a skilled mortgage advisor is because there can be regional differences across the UK. One of the main areas to be aware of is Scotland, getting a mortgage with a low deposit can work differently here to the rest of the UK.

Getting a 5% deposit mortgage in Scotland was difficult over the last few years, but now it’s more possible for home buyers. Here are some of the most popular methods and things to be aware of when looking for a mortgage with a small deposit in Scotland:

Speak with a specialist to get the best mortgage with a low deposit

The right way to secure a mortgage with a low deposit that best suits your needs will depend on your personal circ*mstances. So, it’s important to deal with an expert broker who can find you a bespoke solution.

We offer a free, broker-matching service. This means we’ll quickly assess your situation and deposit size, then introduce you to a skilled broker who can find you the best low deposit mortgage.

Just call 0808 189 2301 or make an enquiry. We’ll arrange a free, no obligation chat between you and your ideal mortgage broker today.

FAQs

Can you negotiate a lower deposit? ›

If the landlord is not willing to budge on the security deposit, you can explore other alternatives that may be more acceptable to both parties. For example, you can suggest a lower amount, a gradual payment, or a refundable deposit.

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Is putting 50% down on a house a good idea? ›

If you put down 50%, your monthly principal and interest payments will be $979. That frees up $588 a month for you to spend on other things, or just over $7,000 a year. Furthermore, if you make a 50% down payment on your home, you'll minimize the amount of mortgage interest you have to pay.

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Is it a bad idea to put less than 20% down? ›

Is it ever smart to put down less than 20 percent? For most homebuyers, a down payment of less than 20 percent will generally cost more money in the long run. But if saving up that kind of money will keep you from ever owning a home, it's worth considering.

What's the lowest deposit for a mortgage? ›

Equally, if you already own a property but your equity is only worth 10% - 15% of the value of your home then you may need a low-deposit mortgage when it's time to remortgage. These days lenders insist on a deposit worth 10% of a property's value as the bare minimum when giving out a mortgage.

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What is a reasonable deposit? ›

In most real estate markets, the average good faith deposit is between 1% and 3% of the property's purchase price. It can be as high as 10% for highly competitive homes with multiple interested buyers. Some sellers prefer to set fixed amounts to help filter out buyers that aren't serious.

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What is the biggest negative when using down payment assistance? ›

For example, certain programs may have minimum credit score requirements or income limits. Additionally, using down payment assistance could mean you have a larger mortgage to pay off, resulting in higher monthly payments or a longer repayment period.

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How much down payment for a 500k house? ›

Conforming loan down payments can vary from 3% to 20% or more, so for a $500,000 home, you'd need between $15,000 and $100,000. Conforming loans, once again, follow Fannie Mae and Freddie Mac guidelines and usually offer competitive terms.

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Is 5% enough to put down on a house? ›

Conventional loan: Conventional loan requirements for primary residences depend on the lender. Some lenders may require a 5% down payment. Other lenders may require a 3% down payment. If your credit score is 620 or above, your lender may provide lower down payment loan options.

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Is $6,000 enough for a down payment on a house? ›

On a $200,000 home, a 3% down payment means you'll need $6,000. Depending on your lender and the details of your loan, you may need to put down at least 5% or 10% to get a conforming mortgage.

What is the 20 down payment on a $300 000 house? ›

A 20% down payment on a $300,000 mortgage is $60,000. The $60,000 down payment is what most lenders look for especially commercial lenders, because it helps mitigate the risk of default.

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Why is a 15 year mortgage better than 30? ›

A 15-year mortgage costs less in the long run since the total interest payments are less than a 30-year mortgage. The cost of a mortgage is calculated based on an annual interest rate, and since you're borrowing the money for half as long, the total interest paid will likely be half of what you'd pay over 30 years.

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What is the lowest downpayment for a mortgage? ›

FHA loan: 3.5 percent down payment

For a Federal Housing Administration (FHA) loan, the minimum down payment is 3.5 percent with a credit score of at least 580. If you have a credit score between 500 and 579, you can still get approved, but you'll need a 10 percent down payment.

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What is considered a large cash deposit when buying a house? ›

A large deposit is defined as a single deposit that exceeds 50% of the total monthly qualifying income for the loan.

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Can I get a mortgage with a 50% deposit? ›

If you are looking to purchase a new home, the more you can put down as a deposit, the better. Raising half of the capital yourself means that you can access a low interest rate on your 50% Loan to Value Mortgage application.

Can you negotiate a down payment? ›

Even if 10% down is out of your price range, you can still sometimes negotiate with lenders to agree on an amount that better suits your finances. You may even qualify for a zero-down auto loan. However, it's generally a good idea to make a larger down payment whenever you're able.

Can you negotiate exchange deposit? ›

If the difference is only small, negotiating a lower deposit is often achievable. However, the lower the exchange deposit, the higher the risk for the seller – so bear this in mind if your buyer is asking you to accept a lower deposit. A 10% deposit is good protection for you (as seller) against your buyer backing out.

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Can you negotiate a lower mortgage payment? ›

Each lender will offer somewhat different rates on the same type of loan. Even a couple of percentage points can make a big difference in how high your money payment will be, so be sure to ask around. Negotiate mortgage rate and fees with desired lender.