Between the cost of rent and the price of property, it’s not easy to scrape together a decent deposit for your first home. 

Saving even a 10% deposit can mean more than £20,000. Opting for a 5% deposit mortgage can help you get onto the property ladder faster. This guide covers how 95% LTV mortgages work, along with some schemes and initiatives that may help eligible buyers purchase a home with a smaller deposit e.g. 5% deposit.

What is a 5% deposit mortgage?

A 5% deposit mortgage is one where you pay upfront just 5% of the value of the property you’re buying, leaving 95% of that value to be covered by the mortgage.

Lenders typically look for a deposit of 10% or more, so a 5% deposit is considered a low deposit. If you can save a bigger deposit, you’ll get access to better rates. 

There’s more on the best mortgages for first time buyers in our full guide.

95% LTV mortgage or 5% deposit - are they the same?

Let’s say you’re buying a place for £200,000. 

• A deposit of 5% of the property’s value is £10,000
• A mortgage of 95% of the property’s value is £190,000

This 95% is called the loan-to-value (LTV) ratio: it means you’re borrowing 95% of the value of the property. So this mortgage is a 95% LTV mortgage. It’s the same thing as a 5% deposit mortgage.

Pros and cons of 5% deposit mortgage

Pros

• They make it easier to buy your first property. This is the main draw of 5% deposit mortgages. For lots of first-time buyers, 5% deposit mortgages mean being able to buy sooner (or at all).
• There’s less saving involved. With a smaller deposit, you can spend less time saving up for your deposit. That means you won’t have to wait as long to move into your new home (and stop paying rent).

Cons

• They’re probably more expensive in the long run. Generally, the lower the LTV, the cheaper the mortgage rate over the full length of the deal. 5% deposit mortgages will likely have much higher interest rates than mortgages with larger deposits.
• Your choice of deals will be more limited. Although there’s a government backstop guarantee scheme that encourages lenders to offer 5% deposit deals, they are more risky for lenders and you’ll usually find more deals available for bigger deposits. 
• ‍There’s a higher risk that you might go into negative equity. Negative equity is when your property becomes worth less than the mortgage you still owe. It’s usually caused by falling house prices – and it’s a bigger risk with smaller deposits, simply because you have less equity (the chunk of the property you own) from the start. This is an issue if you need to sell the property. If you plan to stay for many years more, the value may rise again over time.

Eligibility criteria for a 5% deposit mortgage

Lenders have their own affordability criteria. How much you can borrow depends on factors such as your income, regular spending, credit history and the lender’s assessment of affordability. Many lenders may lend up to around 4.5 times income, but this varies between lenders and applicants. If you’re self-employed, you might find it harder to get this type of deal because your income fluctuates.

With a 5% deposit mortgage, usually you’ll have to:

• Be a British citizen or have UK residency
• Pass strict affordability checks - you must have enough income to cover your mortgage payments
• Have a good credit history

There’s more on eligibility in our full guide.

Can you get a 5% deposit mortgage on a new build?

Some lenders won’t give you a 5% deposit mortgage on a new build. That’s because some lenders consider new-build properties to carry additional risk, and property values can fluctuate in the first few years after purchase.

There are ways to get a new build with a small deposit, though. Subject to availability, Deposit Unlock is a scheme supported by participating builders and lenders that may help eligible buyers buy certain new-build homes with a 5% deposit.

Lenders might also refuse to lend on shared ownership property. 

Certain lenders cap the value of the property you’re buying, when it’s a 5% deposit mortgage. For example, in 2026, Halifax set it at £600,000.

Alternatives to 5% deposit mortgages

‍Shared ownership schemes allow you to buy part of a property and keep buying more until you own it. You pay rent on the part you don’t own and the deposit and mortgage are more affordable. But there are other costs. 

First Homes (England) gives first time buyers a discount on the market value of a new-build home

Help to Buy equity loans (Wales) offers first-time buyers a government loan to help buy a new-build home. It’s due to end in September 2026.

Low-cost Initiative for First Time Buyers (Scotland) enables first-time buyers to buy part of a property, with the government buying the rest.

How to get a 5% deposit mortgage

There are extra things to keep in mind when you’re applying for a mortgage with a small deposit like 5% and rules vary between lenders. It’s a good idea to get some help so you can navigate the market. Why not chat with one of our mortgage experts for free? We’re here to help you figure it out.

‍Your home may be repossessed if you do not keep up repayments on your mortgage. 

Habito by Monzo is a mortgage broker, not a lender. We’re authorised and regulated by the Financial Conduct Authority. This content is intended for general guidance and is not a substitute for personalised mortgage advice.

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Frequently asked questions

Should I wait until I have a 10% deposit?

If you can wait until you’ve saved a 10% deposit, you’ll likely get access to cheaper mortgage rates. But if you’re paying rent while building a larger deposit, you’ll need to factor that into the equation. Whether it’s better to buy sooner or wait until you’ve saved a larger deposit will depend on your personal circumstances, finances and long-term plans.

Can I use a gifted deposit for a 5% mortgage?

Yes, usually you can use a gifted deposit for a 5% deposit mortgage but it must be a gift and lenders prefer it to come from close family - like the Bank of Mum and Dad. Grandparents and siblings are usually OK as donors, too. 

The donor will need to provide a “gifted deposit letter” confirming the money is a no-strings gift. That means confirming it’s not a loan, and they have no stake in the property.

What’s the maximum I can borrow with a 5% deposit?

Lenders are typically more strict about how much you can borrow with a 5% deposit mortgage: it’s usually up to 4.5 times your income, and there may be a limit on the value of the property, too. 

There are a few deals that buck this trend, including from more specialist lenders and for certain professions considered sources of stable income (think doctors and lawyers). 

Is a mortgage always 4.5 times your salary?

Many lenders may lend up to around 4.5 times income, although some may offer more or less depending on your circumstances and their lending criteria.. High-earning professionals like doctors and lawyers can usually access specialist deals that go to 5 times or even 6 times.

If you have a low deposit like 5%, though, you’re unlikely to be able to borrow a high multiple of your salary as lenders already see these deals as quite risky.