Low deposit mortgages: How do they work?

Esther Shaw takes you through what you need to know about low and even no deposit mortgages

For many buyers, the biggest hurdle standing between them and the first rung of the ladder is the deposit. 

With the cost of living still sky-high – and with so many other demands on your hard-earned cash – saving sufficient funds can often seem almost impossible. 

The good news is, there is a solution: the low deposit mortgage.

This type of home loan offers a way to get onto the property ladder without having to resign yourself to a lifetime of saving.

Generally speaking, most low deposit mortgages require you to put down 5% of the property. With this in place, you are then able to borrow the remainder, making it possible to purchase your dream property sooner than you might have imagined.

In this guide, BeCleverWithYourCash will walk you through how low deposit mortgages work, the minimum deposit required, and the key pros and cons to consider before taking the next step.

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What is a low deposit mortgage in simple terms?

This is a home loan that allows you to purchase a property with an upfront deposit, which is a lot smaller than the amount you’d normally put down.

Here are some of the key features:

• Typically requires a deposit of 5-10% of the property value
• Available at a higher loan-to-value (LTV), usually around 90-95% LTV
• Means you can get onto the property ladder sooner with a smaller pot of savings
• Useful for first-time buyers struggling to save a sizeable deposit
• May be part of a Government-backed scheme [more below]

What is the minimum deposit for a mortgage?

Generally speaking, most lenders require a minimum of 5% for a deposit – though some may ask for more, depending on your circumstances.  

As the size of your deposit can have an impact on both affordability and risk, you need to plan carefully. 

Let’s say you are looking to purchase a £200,000 property. For a 10% deposit, you would need to build a fund of £20,000. But for a 5% deposit, you would only need to save £10,000.  

While the latter may sound appealing, there are downsides to only having a small deposit: in short, low deposit mortgages often come with higher costs (as lenders perceive you as higher risk). There also tend to be fewer competitive deals to choose from.

There are even a couple of lenders – Family Building Society and Skipton – that offer mortgages with no deposit required, however these aren’t possible to take out without either a guarantor or a perfect track record of rent payments.

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How does a low deposit mortgage work?

Here’s how it works in practice:

• First off, you need to amass your deposit. It’s worth making use of high-paying savings accounts to benefit from high rates of interest. One great option is a Lifetime ISA (LISA)  where your savings get boosted with a 25% Government bonus of up to £1,000 a year
• Once you’ve saved your deposit, you then borrow the rest of the property value, based on the LTV. So, for example, if you are putting down a 5% deposit, you will need to borrow the remaining 95% (95% LTV)
• You’ll then make monthly repayments. On a standard repayment mortgage, this will include both capital and interest. (Just note that interest-only mortgages work differently)
• In general, the larger your deposit (and the lower your LTV), the better your mortgage deal is likely to be. This can often mean more competitive mortgage rates, reduced monthly payments – and less interest paid overall

Worked example:

If you have a 5% deposit on a £200,000 home, this means you put down £10,000 and borrow £190,000 (95% LTV). As mentioned earlier, a higher LTV mortgage usually means higher rates and repayments. 

By contrast, if you have a 20% deposit on that same £20,000 home, this means you put down £40,000 and borrow £160,000 (80% LTV).

This lower LTV typically gives you access to cheaper interest rates and lower monthly repayments (as lenders will view you as lower risk). As a result, you pay less overall interest over the life of the mortgage.

Can you get a mortgage with a low, or even no, deposit?

While it is possible to get a home loan with a low – or even no – deposit, eligibility depends on several key factors:

• A lender will look at your earnings and assess overall affordability
• They will also factor in your credit score – you’ll need a good credit history as part of the affordability check; a blemish-free record can help improve your chances of getting accepted
• Employment status is also important – recent job changes may raise concerns about financial security. Lenders will want to see stability in your employment history

What all this shows is that even though low deposit mortgages are available, there is no guarantee you will get one. Approval will depend on your individual circumstances.

It’s also worth noting that in some cases, it is possible to get a mortgage with no deposit at all – known as a ‘100% mortgage.’ However, these can carry even higher risk in the eyes of a lender as you have no equity (meaning an increased likelihood of negative equity, (more below), and a greater risk of you defaulting.

Ultimately, the larger your deposit, the better your chances of approval – and the more competitive your mortgage rates are likely to be. 

In other words, if you have less than 5%, the best approach is probably to keep on saving.

Try our mortgage calculator

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How to get a low deposit mortgage

There are several key steps you need to follow, and these include:

• Checking what you can realistically afford. Take a look at our ‘mortgage affordability calculator’ to see how much you might be able to borrow
• Saving up for your deposit. This means budgeting carefully and setting money aside regularly into competitive savings accounts
• Getting a decision in principle (DiP). This is an indication from a lender that they may be able to offer a mortgage. Crucially a DiP does not affect your credit score
• Comparing mortgage deals. This involves looking at rates, fees and overall costs to find the best option for you. Check out our comparison table to see what’s currently on offer. If you’re looking for certainty, it’s well worth considering a fix 
• Applying for a mortgage. While you can do this directly with a lender, it can be a good idea to speak to a broker who can compare deals across the whole of the market. They can also guide you through the process and offer advice to help the process run as smoothly as possible

What are the pros and cons of low deposit mortgages?

Before making any decision, you need to understand the benefits and drawbacks of this type of home loan.

You should weigh all these up to ensure you make the right choice for you.

Pros 

• Lower upfront savings needed
• May mean you can get on the property ladder sooner
• More lenders now offer 5% deposit deals than in previous years 
• If house prices rise, allows you to benefit sooner

Cons

• The rate on your mortgage (and monthly repayments) could be higher
• Greater risk of negative equity; this is where your home is worth less than the amount you have left to pay on the mortgage
• Can be harder to get approved for the mortgage
• Stricter affordability checks may restrict how much you can borrow
• You may find there are fewer competitive deals available compared to if you had a larger deposit

What schemes can help you buy with a smaller deposit?

There are a handful of options that may support buyers with smaller amounts to put down. These include:

• Mortgage Guarantee Scheme – this ran until June 2025, allowing buyers to secure mortgages with deposits of less than 10%. While this is now closed, some lenders offer their own versions of this
• Shared Ownership – this is a Government-backed affordable housing scheme aimed at helping those struggling to buy. It enables you to purchase a ‘share’ of a property, while paying on the remainder to the housing association that owns the house. Read more with our guide
• Family-assisted mortgages – this option involves using family support. This might, for example, involve you using parents’ savings to boost borrowing, and to improve your chances of getting approved

Word of warning: Be sure to do your research before deciding to use any home-buying scheme. You need to be sure it is suitable for you.

Is a low deposit mortgage right for me?

A low deposit mortgage may be the right choice for you if:

• Your savings are limited
• And you are keen to buy sooner rather than later

Just note that by opting for a low deposit mortgage both rates and monthly repayments could be higher. 

If possible, consider waiting and boosting savings, as that will mean you are a lower-risk borrower. This can improve your chances of being able to access a wider range of cheaper mortgage deals.

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FAQs

What is the lowest deposit for a mortgage?

Generally speaking, in the UK, the minimum is around 5% of a property’s value, though lower-deposit schemes do exist. 

Can I get a mortgage with a 2% deposit?

In the UK, most lenders require at least a 5% deposit. A 2% deposit mortgage is extremely rare, though some schemes or guarantor options may help if you have very limited savings.

Can you still get a 5% deposit mortgage?

Yes, these low deposit deals are still available, with several lenders offering them. Just note that options can vary, so research carefully. If in doubt, seek advice from a broker.

Can I get a mortgage with bad credit and a low deposit?

In theory, yes. But it will be harder. A smaller band of lenders will be willing to lend if you have both a small deposit and tarnished credit record, plus rates may be higher. It may make sense to speak to a broker or a specialist lender.

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Explore your mortgage options

If you’re interested in finding out more about low deposit mortgages:

• Begin by researching providers and the rates they are offering. Our ‘mortgages comparison table’ tool compares more than 20,000 mortgage products from over 100 lenders
• Make use of our mortgage calculator to see how much you could potentially borrow and the monthly repayments you could expect to pay
• Be sure to check eligibility and affordability carefully. This is a key part of the home-buying process as it’ll dictate your overall budget, and which property you can actually purchase-Take a look at the wide range of helpful articles from the BeCleverWithYourCash team, to help you navigate your way through getting a mortgage, no matter whether you’re a first timer or remortgaging

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