What options do I have if I have a low deposit
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What options do I have if I have a low deposit?
Can I get a mortgage with a 5% deposit?
Yes, definitely. There are lots of lenders out there offering different products, and each has their own eligibility criteria. There are options available to everyone, subject to criteria being met.
If you have a 5% deposit and are thinking you can’t get on the property ladder, please do reach out, because there definitely are options available.
What are the requirements to get a mortgage if I have a low income?
Essentially, there are no specific requirements. It will come down to the affordability calculations that lenders carry out, based on your income and expenditure.
Obviously, the lower your income, the less you’ll be able to borrow, and vice versa – the higher your income is, the more you’ll be able to borrow.
It’s best to sit down with your advisor, go through your income and expenditure, and we can then let you know exactly what you can borrow and what that would look like.
What low deposit schemes are available?
[Information correct at the time of recording in February 2025]
I’ll start with the Deposit Unlock scheme, which helps borrowers access 5% mortgages on new build properties. It can be harder to obtain lower deposit funding on new builds with many lenders, but this scheme helps. Around 17 developers have signed on at the time of recording.
You’ve also then got the First Home scheme, where you could potentially buy a new build property at 30% to 50% less than the market value.
You’ve also then got the option for a 100% mortgage, if you are currently renting and have been for the last 18 months. The lender looks at the rental payments being made and uses those to ascertain how much you could borrow, based on that track record.
One lender has recently released a mortgage with a £5,000 deposit requirement. That allows you to borrow up to £495,000. So on a property value of £500,000, it’s essentially a 99% mortgage. That’s quite a new one and we’ve had a lot of enquiries on that. As always, it comes down to income, expenditure and certain requirements are being met.
People listening may have heard of the Shared Ownership scheme, which is essentially where you buy a share of a property. Instead of buying 100%, you might buy 30% or 40% of it. That requires a lower deposit because you’re buying a smaller share, and you’d pay rent on the share that you don’t own.
It’s also known as part buy, part rent, and it’s a good scheme to help people get on the ladder.
What do you do if you don’t have a deposit? Can you get a mortgage with no deposit?
This ties in nicely with one of the schemes I just mentioned, the 100% mortgage. It’s essentially based on the rent you’ve been paying. If you’ve been renting for the last 18 months, they’ll look at the rental payments to calculate what you could borrow.
The monthly payments on that mortgage can’t exceed 110% of that rental payment, as at the time of recording in February 2025. Currently, only one lender is doing that. But it is definitely an option for people listening who may not have had a chance to save up a deposit yet.
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Can my parents lend me money for a house deposit?
If they are lending you the money, no. It needs to be a gift. Your parents or any immediate family members can certainly help you out, but it would need to be a gift, not money they’re expecting to be paid back.
Otherwise, lenders would have to factor in the repayments you would be making. It could also be a gift from friends – different lenders will cater for different things.
Can I get a mortgage if I have a low deposit as a First Time Buyer?
It can be very difficult for anyone to get on the ladder – it’s very tough since the cost of living crisis. It’s hard to save up a deposit while you’re also paying for rent and daily essentials.
But we do have all those schemes I touched upon. You’ve got mortgages that don’t require any deposit, the £5,000 deposit scheme and others that allow you to buy either a smaller share of the property or get a discount, as we touched on earlier.
So yes, you certainly can get a mortgage as a First Time Buyer with a low deposit. Those schemes come in really handy for that.
Can I get a mortgage with a low deposit if I have bad credit?
Bad credit differs – one person’s opinion of bad credit might be different to another’s.
They may think bad credit is missing a payment, whereas another person sees bad credit as defaults or county court judgements on a credit file.
It’s quite a broad range. Some lenders will require a higher deposit depending on what your credit history looks like. My advice would just be to reach out to your advisor. We can look at all your options and let you know exactly what’s available.
I’d like to think there’s options out there for everyone. Depending on how bad your credit is, though, some lenders will require a higher deposit.
Can you get a Buy to Let mortgage with a low deposit?
Buy to Let works a little bit differently because it’s non-regulated. It’s not like a standard mortgage on a property that you’re going to live in.
Buy to Let mortgages require at least 20% to 25% deposit, which won’t be classed as low to most people. That’s regardless of your circumstances, your credit history and income. It’s just what lenders require at this time.
You’ve demonstrated how a mortgage broker can help throughout this episode, but do you have any tips for people with a low deposit?
My advice really always is to reach out to an expert. Everyone’s circumstances differ. Opinions on what makes a low income, low deposit or bad credit will differ from person to person, and their mortgage options will differ too.
An advisor can take you through all the steps. We explore your circumstances and where you’re trying to get to, look at your credit file and let you know exactly where you stand.
That helps you going forward – if you’re going out and viewing properties, you’ll be looking at homes that are within reach. You’re not wasting your time, getting your heart set on a property that isn’t available to you at that time.
That’s what we’re here to help you with. We can advise you on what’s available to you and how best to get where you want to be.
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