If your deposit savings are sitting at around 5% of what you want to spend, a 95% LTV mortgage might be exactly what you need to get started. These mortgages let you borrow up to 95% of a property’s value, and they’ve become more widely available thanks to a government-backed scheme. Here’s how they work, what to watch out for, and whether one might suit you.
What Is a 95% LTV Mortgage?
LTV stands for loan-to-value, the percentage of the property’s price you’re borrowing versus the percentage you’re putting down as a deposit. A 95% LTV mortgage means you’re borrowing 95% of the property’s value and contributing just 5% as a deposit.
On a £220,000 home, for example, a 95% mortgage means borrowing £209,000, with a £11,000 deposit.
Why Are 95% Mortgages Pricier Than Other Deals?
Lenders view 95% LTV borrowing as higher risk than, say, 90% or 85% LTV, because there’s a smaller buffer if property values fall. As a result, 95% mortgages typically carry higher interest rates than deals with bigger deposits, meaning your monthly payments will usually be higher than they would be with the same loan amount at a lower LTV.
That said, for many buyers the alternative isn’t a cheaper mortgage, it’s years more of saving while renting, so the comparison isn’t always as simple as “wait for a better rate.”
The Freedom to Buy Scheme
In July 2025, the government made its Mortgage Guarantee Scheme permanent under a new name: Freedom to Buy. Here’s what it actually does:
- The government provides lenders with a guarantee covering part of the loan above 80% LTV, reducing the lender’s risk
- This encourages more lenders to offer 95% mortgages than they otherwise would
- It applies to mortgages with a deposit of roughly 5-9% (91-95% LTV)
- It’s open to first-time buyers and existing homeowners moving with a 5% deposit, not just first-time buyers
- You don’t apply to the scheme directly, you simply apply for a 95% mortgage with a participating lender, and they apply the scheme behind the scenes
- It currently applies to properties worth up to £600,000, covering the vast majority of the UK market, including much of London
Because the scheme is now a permanent fixture rather than a temporary one, many lenders are also comfortable offering their own 95% deals independently of it, which has increased overall choice in this part of the market.
What Lenders Look at for 95% LTV Applications
Because the margin for error is smaller at 95% LTV, lenders tend to apply closer scrutiny to:
- Credit history — a clean credit record matters more here than at lower LTVs
- Income stability — steady employment history is viewed favourably
- Affordability — your outgoings relative to income, including existing debts
- Property type — some lenders restrict 95% lending on flats, new builds, or non-standard construction
Not every lender offers 95% products, and of those that do, not all will lend on every type of property, so this is an area where having a broker compare the market properly makes a real difference.
The Risk Worth Understanding: Negative Equity
With only a 5% buffer, a 95% mortgage carries a real risk of negative equity, where your property is worth less than you owe on the mortgage, if prices fall shortly after you buy. This doesn’t affect your ability to keep living in the home or paying your mortgage, but it can make moving or remortgaging more difficult until prices recover or you pay down more of the loan. It’s worth going in with realistic expectations about this risk rather than assuming prices only move upward.
95% Mortgages vs Other Low-Deposit Options
| Option | Deposit Needed | How It Works |
|---|---|---|
| 95% LTV mortgage | 5% | Standard mortgage, higher LTV, usually higher rate |
| First Homes Scheme | Based on discounted price | New-build homes sold at 30-50% below market value |
| Shared Ownership | A deposit on your share only | Buy 25-75% of a property, pay rent on the rest |
| Guarantor mortgage | Varies | A family member’s income/assets support your application |
A broker can talk through which of these actually fits your situation, since the right option depends heavily on your income, the area you’re buying in, and whether you want to own the property outright from day one.
Frequently Asked Questions
Do I need to be a first-time buyer for a 95% mortgage?
No. While many 95% deals are popular with first-time buyers, the Freedom to Buy scheme and most 95% products are also available to existing homeowners moving with a 5% deposit.
Are 95% mortgage rates much higher than other deals?
They’re generally higher than mortgages with bigger deposits, though the gap varies by lender and market conditions. A broker can show you the real difference in monthly payments for your situation.
What happens if house prices fall after I buy with a 95% mortgage?
You could end up in negative equity, where the property is worth less than you owe. This doesn’t stop you living there or paying your mortgage, but can make moving or remortgaging harder until it resolves.
Is there a maximum property price for a 95% mortgage?
Under the Freedom to Buy scheme, the property must be worth up to £600,000, though non-scheme 95% products may have different limits depending on the lender.
Can I get a 95% mortgage if I’m self-employed?
Yes, though fewer lenders offer 95% products to self-employed applicants, and you’ll typically need two to three years of accounts. A broker can help identify which lenders are most likely to accept your circumstances.
Thinking a 95% mortgage might be your route onto the property ladder? Speak to our team for free, no-obligation advice on what’s realistically available to you.
