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95% mortgages

Find out how 95% mortgages work, their pros and cons, and how to increase your chances of getting one.

In this article
What is a 95% mortgage? Can I get a 95% mortgage? 95% mortgage calculator: how much could you borrow?
What are the disadvantages of 95% mortgages? Alternatives to 95% mortgages Get personal advice on your mortgage options

What is a 95% mortgage?

A 95% mortgage is a loan for 95% of a property’s price. With a 95% mortgage, you'd need to provide a 5% deposit to cover the remainder.

For example, if you wanted to buy a house worth £200,000 with a 95% mortgage, you'd borrow £190,000 (95% of the price) and put down £10,000 of your own money (the remaining 5%).

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If you're currently saving towards a deposit, our mortgage deposit calculator shows how long it could take you to build up 5% of the cost of a property in your chosen area.

Saving for your first mortgage?

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Can I get a 95% mortgage?

Saving up your 5% deposit is only half the battle – you’ll need to be able to prove that you earn enough to meet the monthly mortgage repayments before anyone will consider lending you a 95% mortgage.

Affordability testing

While your salary is an important starting point, this isn’t the only factor lenders will take into account. They'll assess the full range of your income, regular outgoings and any debt, among other things, when working out whether you can afford a mortgage.

Speak to a mortgage adviser if you want guidance on getting yourself into the best possible position before applying. You can call Which? Mortgage Advisers for a free consultation on 0800 197 8461.

Credit score

To qualify for a 95% mortgage you’ll need a high credit score, with a good history of paying bills, loans and credit cards on time. If you’re paying rent, you can choose to incorporate this into your Experian credit history.

Making sure that you're registered on the electoral roll is a quick and easy way of boosting your credit score.

New-build homes

It's very unusual for lenders to offer 95% mortgages on new-build homes, and you’re also unlikely to be able to get a 95% mortgage if you own another property.

If you're interested in buying a new-build, it's worth investigating the Help to Buy scheme, where you can boost a 5% deposit with a government loan, meaning you take out a smaller mortgage.

95% mortgage calculator: how much could you borrow?

If you’re a first-time buyer, you could theoretically borrow up to five times your salary (or combined salary if you’re buying with someone else) with a 95% mortgage.

For example, if you had saved a £10,000 (5%) deposit and wanted to buy a £200,000 home, you'd probably need a salary of at least £38,000 (or a combined salary of the same amount for a couple), although this will vary depending on the lender and your personal circumstances. 

Use our calculator to find out how much mortgage you may be able to get.

What are the disadvantages of 95% mortgages?

Interest rates

Generally speaking, the bigger the loan-to-value (LTV) ratio of your mortgage, the higher the interest rate you’ll be charged - so 95% mortgages tend to have higher interest rates than, say, 85% mortgages.

For this reason, it can sometimes be beneficial to save up a bigger deposit so you can get a cheaper mortgage deal.

On the other hand, if property prices in your area are rising rapidly, it could be a good idea to get on the property ladder sooner rather than later.

Should I keep saving or buy a place now?

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As with any mortgage, you'll also need to budget for the additional additional costs - both on the mortgage itself and for any extras, such as stamp duty and conveyancing.

Higher lending charges

If you take out a mortgage with a small deposit, your mortgage provider will be lending you a large amount of money in relation to the property’s price. This means your mortgage has a high loan-to-value (LTV) and so you may have to pay a ‘higher lending charge’ (HLC).

The HLC will sometimes be a percentage of the amount you borrow and your lender may use it to buy insurance, known as a mortgage indemnity guarantee (MIG).

A mortgage indemnity guarantee covers your lender if they repossess your property and end up selling it for less than the amount owed on the mortgage.

Difficulty remortgaging

Taking out a 95% mortgage as a first-time buyer could make it difficult to remortgage to a better rate when your deal ends.

This is because it can take longer to build up enough equity to qualify for better deals.

Negative equity

If the value of your home falls, there’s a risk you could end up in negative equity. This is where you owe more on the property than what it’s worth.

The risk of this happening decreases with time, as you pay off more of your mortgage and build up your equity in the property.

Alternatives to 95% mortgages

A 95% mortgage is just one option if you have a small deposit.

Under shared ownership, you could buy a 25%-75% share of a property and pay rent on the remaining share.

Alternatively, a Help to Buy equity loan could help if you’re willing to buy a new-build home. Here, you put down a 5% deposit and the government loans you a further portion of the property price (40% in London, 20% in the rest of England and Wales, and 15% in Scotland) meaning you only need to take out a mortgage on the remaining balance.

You may also be able to get help from your parents through a guarantor mortgage, where your family member takes on some of the risk of lending to you. This means that a mortgage provider may be willing to lend you more than they otherwise would.

Get personal advice on your mortgage options

For advice on all things mortgages, and help finding and applying for the best one for you, call Which? Mortgage Advisers on 0800 197 8461 or fill in the form below for a call back.

If you'd like to talk to an expert adviser about your mortgage options, complete your details and Which? Mortgage Advisers will give you a free call back.

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Submit request When you complete this form your details are sent securely to Which? Mortgage Advisers. We will only contact you for your free consultation. Your home may be repossessed if you do not keep up repayments on your mortgage.

Correct as of date of publication.


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