95% mortgages explained

With a 95% mortgage, you borrow 95% of the property's value and put down a 5% deposit yourself. It's a popular choice for first time buyers, but it's not limited to them. Home movers and people looking to remortgage can use them too.

Apply for a 95% mortgage

What's a 95% mortgage?

A 95% mortgage lets you borrow up to 95% of the price of the property you want to buy. The remaining 5% comes from your own savings as a deposit. You might also hear it called a 95% loan to value (LTV) mortgage, because the loan covers 95% of the property's value.

Here's a quick example. If you're buying a home for £200,000, you'd need a deposit of £10,000 (that's 5%) and a mortgage of £190,000 (the other 95%).

The 95% figure is the maximum most lenders will offer. That means a 5% deposit is typically the smallest amount you can put down when buying a property.

How does a 95% mortgage work?

A 95% mortgage works in the same way as any other mortgage. You apply to a lender, they assess your income, outgoings and credit history, and if everything checks out, they'll offer you a deal.

The main difference is that because you're borrowing a higher proportion of the property's value, lenders see it as a bigger risk. That usually means interest rates on 95% mortgages are a bit higher than what you'd get with a larger deposit. Eligibility checks can be stricter too, so having a clean credit history and stable income really helps.

You can choose from different types of deals at 95% LTV, including fixed rate mortgages (where your rate stays the same for a set period) and tracker mortgages (where your rate moves in line with the Bank of England base rate). Most lenders offer terms from two to five years at this level.

1. Save your 5%

You need at least 5% of the property's purchase price as a deposit. That's £12,500 on a £250,000 property.

2. We lend you 95%

We lend you the remaining 95%. This is your mortgages. You'll repay it each month, along with interest.

3. The home is yours

From day one, you're the legal owner. As you repay the mortgage, your share (equity) grows over time.

4. Remortgage later

As your equity increases, you can mortgage to a lower LTV deal. That usually means a better interest rate.

Who can get a 95% mortgage?

95% mortgages aren't just for first time buyers, although they're the most common users. You can also apply if you're moving home and don't have much equity, or if you're remortgaging onto a new deal.

To be eligible, you'll generally need to meet the following criteria:

You're buying a residential property to live in (not a buy to let or second home).
You have a deposit of at least 5% of the purchase price.
You can demonstrate that you can afford the monthly repayments.
You have a reasonable credit history.
The mortgage is on a repayment basis (not interest only).

Each lender sets its own criteria, so if one turns you down, it doesn't mean they all will. A mortgage adviser can help you find the right lender for your circumstances.

Advantages and disadvantages of a 95% mortgage

Like any financial product, there are upsides and downsides to weigh up. Here's a straightforward look at both sides.

Advantages

✔ You can buy sooner. Saving a 5% deposit takes less time than saving 10% or 15%. If you've been renting and watching property prices climb, getting on the ladder sooner means you can start building equity in your own home instead of paying someone else's mortgage.

✔ It's more accessible. Not everyone has family who can gift them a large deposit. A 95% mortgage opens the door for people who are ready to commit to homeownership but haven't been able to build up a large pot of savings.
Repayment costs. A monthly mortgage repayment cost can sometimes be cheaper than your monthly rental payments.

✔ You start building equity straight away. Every repayment you make increases your share of the property. Over time, as you pay down the mortgage and the property grows in value, your equity builds. This puts you in a stronger position when it's time to remortgage or move.

✔ There's plenty of choice. Many major lenders now offer 95% mortgages, so you're not limited to a handful of options. The government's permanent mortgage guarantee scheme has also helped keep availability strong.

Disadvantages

✘ Higher interest rates. Because the lender is taking on more risk, the interest rate on a 95% mortgage will usually be higher than on deals with a bigger deposit. That means your monthly repayments will cost more, and you'll pay more interest over the life of the mortgage.

✘ The risk of negative equity. If property prices drop, the value of your home could fall below what you owe on your mortgage. This is known as negative equity, and it can make it tricky to sell or remortgage. With only 5% equity to start with, even a small dip in prices could put you in this position.

✘ Stricter eligibility. Lenders tend to apply tighter checks at 95% LTV. You'll usually need a clean credit record with no missed payments in the past 12 to 24 months. Self-employed applicants may find their options more limited, as some lenders require a minimum 10% deposit.

✘ Fewer deals to compare. While availability has improved a lot in recent years, you'll still find fewer mortgage products at 95% LTV than at lower loan to value ratios. A good mortgage adviser can help you find competitive deals.

How much deposit do you need?

For a 95% mortgage, you need a deposit of 5% of the property's purchase price. Here's what that looks like at different price points.

Property price	5% deposit	Mortgage amount
£150,000	£7,500	£142,500
£200,000	£10,000	£190,000
£250,000	£12,500	£237,500
£300,000	£15,000	£285,000
£400,000	£20,000	£380,000

Remember, you'll also need to budget for other costs on top of your deposit, including solicitor fees, survey costs, and potentially stamp duty.

Tips for getting a 95% mortgage

Check your credit report. Before you apply, get a copy of your credit report from Experian, Equifax or TransUnion. Look for any errors and make sure all your accounts are up to date. Even a small unpaid bill can affect your application at 95% LTV.

Get a decision in principle first. A decision in principle gives you an idea of how much a lender is willing to let you borrow. It shows estate agents you're serious, and it helps you set a realistic budget.

Speak to a mortgage adviser. An adviser can compare deals across the market and find options that suit your circumstances. Some 95% mortgage products are only available through brokers, so it's worth having someone in your corner.

Save where you can. If you can stretch your deposit even slightly above 5%, you might unlock better rates. Even an extra 1% or 2% can make a difference.

How do I apply for a 95% mortgage

Getting a 95% mortgage doesn’t have to be complicated. Here are four simple steps to help you go from thinking about it to moving in.

Step 1: Find out how much you could borrow

Before you start house hunting, it’s a good idea to know what you could afford. Use our mortgage borrowing calculator to get an estimate based on your income and deposit.

Step 2: Get a decision in principle

A decision in principle (DIP) gives you a clear idea of how much a lender is willing to offer you. It’s not a guarantee, but it shows estate agents and sellers that you’re a serious buyer. You can get a decision in principle by speak to a mortgage adviser, or you can get one online.

Step 3: Find a house you want to buy

Now comes the exciting part. With your budget in mind and a DIP in hand, you can start viewing properties with confidence. Take your time, do your research on the area, and don’t be afraid to ask questions when you find somewhere you like.

Step 4: Apply for your mortgage

Once your offer’s been accepted, it’s time to make a formal mortgage application. You’ll need to provide proof of income, bank statements, ID, and details about the property. Your lender will carry out a full affordability assessment and arrange a property valuation before making a final decision.

Find a mortgage for your new home

Nottingham Building Society is working with Mortgage Advice Bureau to get the right mortgage for your new home. Their advisers have access to over 12,000 mortgages from over 90 trusted lenders to find the right fit.

Just answer a few quick questions about the property and how much you want to borrow. Then, they’ll call you to chat about your options. Let’s turn that homeownership dream into a reality.

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Frequently asked questions

Can I get a 95% mortgage as a first time buyer?

Yes. In fact, first time buyers are the most common users of 95% mortgages. If you've saved a 5% deposit and can demonstrate you can afford the repayments, you're in a good position to apply. Many lenders also offer specific first time buyer products at this LTV.

Are 95% mortgages only for first time buyers?

No. While they're particularly popular with first time buyers, home movers and people remortgaging can also use 95% mortgages. For example, if you're moving to a more expensive property and your equity only covers 5% of the new purchase price, a 95% mortgage could work for you.

What interest rates can I expect on a 95% mortgage?

Interest rates on 95% mortgages are typically higher than those on deals requiring larger deposits. The exact rate depends on the lender, the type of deal and your personal financial circumstances. Rates change regularly, so it's always worth speaking to a mortgage adviser for up to date information.

Can I get a 95% mortgage on a new build property?

It can be more difficult. Some lenders are cautious about offering 95% mortgages on new builds because these properties can sometimes dip in value during the first few years. That said, schemes like Deposit Unlock have been designed to help buyers purchase new builds with a 5% deposit. Your options may be more limited, but they do exist.

What happens if my property falls in value after I buy?

If your property's value drops below what you owe on your mortgage, you'd be in what's called negative equity. This isn't necessarily a problem if you can keep up your repayments and don't need to sell or remortgage. Over time, property values tend to recover. But it's something to be aware of, especially with a smaller deposit.

Can I get a 95% mortgage if I'm self employed?

It's possible, though your options may be narrower. Some lenders require self employed applicants to have at least a 10% deposit. Others will consider 5% if you can provide two or three years of accounts or tax returns showing stable income. A mortgage adviser who understands the self employed market can be especially helpful here.

How much can I borrow with a 95% mortgage?

How much you can borrow depends on your income, outgoings, credit history and the lender's criteria. As a rough guide, many lenders will consider lending around four to four and a half times your annual income. Some set a maximum loan amount at 95% LTV, often in the region of £500,000 to £750,000.

Is it better to wait and save a bigger deposit?

It depends on your situation. A bigger deposit means lower interest rates, smaller monthly repayments and more equity from day one. But the time it takes to save more could mean missing out if property prices are rising. There's no single right answer. It comes down to what you can afford now and what works for your long term plans.

What's the difference between a 95% mortgage and the government mortgage guarantee scheme?

The Government's mortgage guarantee scheme works behind the scenes to encourage lenders to offer 95% mortgages by giving them a partial guarantee. From your perspective as a buyer, there's no real difference between a 95% mortgage backed by the scheme and one that isn't. The scheme simply means more 95% products are available. Always compare all the deals open to you, regardless of whether they're part of the scheme.

Can I use a gifted deposit for a 95% mortgage?

Yes, most lenders accept gifted deposits from close family members, typically parents or grandparents. You'll usually need a signed letter confirming the gift and stating that the person giving the money has no financial interest in the property. The lender will also want to see evidence of where the money came from.

What if I want to overpay my mortgage later on?

Most lenders allow you to overpay up to 10% of your outstanding balance each year without early repayment charges. Overpaying is a great way to reduce your mortgage faster and build equity more quickly. When your deal ends, you'll be in a stronger position to remortgage at a better rate because your LTV will have improved.

Do I need to pay stamp duty with a 95% mortgage?

Stamp duty isn't linked to the type of mortgage you have. It's based on the property's purchase price. First time buyers in England and Northern Ireland currently benefit from stamp duty relief on properties up to a certain threshold. It's worth checking the latest stamp duty thresholds, as these can change.

What other costs should I budget for beyond my deposit?

Your deposit is just one part of the picture. You'll also need to cover solicitor or conveyancer fees, a property survey, mortgage arrangement fees (if your deal has one), and moving costs. It's a good idea to set aside around £2,000 to £5,000 on top of your deposit for these extras. Here’s more information on house buying costs.