For many would-be homeowners, the biggest barrier to buying a property is saving up for a hefty deposit. With property prices rising and the cost of living stretched, scraping together 10% – let alone 20% – can feel impossible. But here’s the good news: you don’t need a huge deposit to get on the property ladder.
In this guide, we’ll explore the options available if you’re buying a home with a low deposit and how Your Mortgage Shop can help you find the right solution for your circumstances.
What’s Considered a Low Deposit?
In the world of mortgages, a low deposit typically means anything below 10% of the property value. Some lenders even offer 95% or 100% loan-to-value (LTV) mortgages in certain cases, which means you’d need little or no deposit at all.
1. 95% Mortgages
A 95% mortgage allows you to borrow up to 95% of the property’s value, meaning you only need a 5% deposit. These are available from a number of mainstream lenders, especially for first-time buyers.
Pros:
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Get on the property ladder sooner
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Less money to save upfront
Cons:
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Higher interest rates than lower LTV mortgages
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May require strong credit history and income
2. 100% Mortgages (No Deposit Mortgages)
Yes, 100% mortgages do exist – but they’re not as widely available and usually require some form of family support, such as a guarantor or collateral charge on a relative’s home. Bath Building Society, for example, recently updated its ‘Rent a Room’ mortgage which offers up to 100% borrowing if you rent out a room and secure the loan with a parent’s home.
These can be ideal for:
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First-time buyers with family support but no savings
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Buyers in stable employment with strong affordability
3. Shared Ownership Schemes
Shared ownership allows you to buy a percentage of a home (usually between 25% and 75%) and pay rent on the rest. You’ll only need a deposit based on the share you’re buying, which can significantly reduce upfront costs.
Ideal for:
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First-time buyers
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People on moderate incomes
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Those struggling with full ownership costs
4. First Homes Scheme
The government’s First Homes scheme offers new-build homes at a discount of at least 30% to local first-time buyers and key workers. This discount is passed on when the home is sold, helping keep the property affordable long term.
A lower purchase price = lower deposit requirement. It’s a great way to buy a home with less financial pressure upfront.
5. Guarantor Mortgages
With a guarantor mortgage, a family member agrees to cover your repayments if you can’t. These are useful if you have little or no deposit but can afford monthly repayments. Some lenders will even use your guarantor’s income or assets to help boost your affordability.
6. Using Gifted Deposits
If a family member or close friend is happy to gift you money for a deposit, this can help you secure a mortgage with a lower LTV. Most lenders accept gifted deposits, provided it’s a genuine gift and not a loan that needs repaying.
You don’t need a 20% deposit to buy a home – and at Your Mortgage Shop, we’re here to help you find the right low-deposit mortgage option for your situation. Whether you’re a first-time buyer or returning to the market, we’ll guide you through every step of the process and compare deals from across the market to get you the best deal.
Let’s make homeownership possible – even with a small deposit.
Get in touch today and speak to one of our friendly advisers for free, expert mortgage advice tailored to you.
