Guide to Low Deposit Mortgages

It is possible to get a mortgage with a 5% deposit of a property’s value, although, you’ll find that some lenders may require no less than 10%. If you have come across this, you’re not the only one to have experienced it.

Our team of mortgage advisors in Doncaster are here to help. Here are some suggestions we recommend to help increase your chances of getting onto the property ladder with a small deposit.

Utilising the Various Government Schemes

Take advantage of government schemes under the ‘Own Your Home’ project. One of these schemes might offer the extra boost you need to continue through your mortgage journey.

With a handful of government schemes to choose from, buying a home is now more affordable than in previous years. These schemes have allowed first time buyers and home movers in Doncaster the opportunity to get themselves onto the property ladder.

Shared Ownership

Shared Ownership lets you take a mortgage out on a percentage share of a property (usually anywhere between 25%-75%) and then pay the rest back via rent. Also, it’s worth knowing that you can increase the share of the property that you own further down the line if you want to. 

If you want to go down this route, we recommend that you speak to an expert mortgage advisor in Doncaster before diving headfirst into the scheme.

Lifetime ISA

A Lifetime independent savings account is a savings account where your money grows year on year interest-free. You can put as much money in it as you’d like each month, as long as it doesn’t exceed a total of more than £4,000 over the year. This is the maximum that you can save each year.

Each year, the government will top up what you’ve saved by 25%. So, if you save up to the maximum, you will get an extra £1,000 for free.

Right to Buy

Right to Buy is a government scheme that lets you buy your home at a substantial discount if you’re a council tenant. You may be able to use your discount as a mortgage deposit so you can buy your home with fewer savings.

95% Mortgage Guarantee Scheme

A 95% mortgage is when you borrow against 95% of a property’s price, covering the remaining 5% with your deposit. Of course, getting a mortgage is not guaranteed in any way, shape or form. You’ll still be required to pass things such as credit checks and affordability assessments.

Alternative to Using Government Schemes

There are other ways besides using government schemes to get a mortgage with a smaller deposit.

Have an Agreement in Principle at the Ready

A mortgage in principle (AIP), also known as a decision in principle, is a written estimate from a bank or building society that indicates how much money you can borrow.

It can prove you’re a serious buyer and can, in theory, get a mortgage. We can usually turn around an agreement in principle for our customers in 24 hours.

In this situation, it’s not really about the deposit. An AIP indicates to the seller that they’ll be able to continue through the process quicker by choosing you as you will speed up their process!

Keep Saving!

Another alternative would be to carry on saving up. Even pushing back your home buying journey for a further couple of months could boost up the total amount of your mortgage deposit.

Your small deposit could become much more prominent if you knuckle down and save for just a little longer. Suppose none of the houses on the market are appealing to you in that area; even more reason to save up and wait!

Taking out a Loan to Cover Your Deposit

Taking out a loan to cover your deposit can sometimes affect your ability to get accepted, and this is because you are essentially borrowing 100% of the mortgage.

Lenders will question whether you’ll be able to afford it or not. They can’t risk lending to you if that loan affects your ability to keep up to date with your mortgage payments.

This is a specialist topic, and we would advise that you speak to a mortgage advisor in Doncaster and get in touch with us first.

Date Last Edited: February 12, 2024