95% LTV mortgages: What do you need to know?

If you’ve been struggling to get on the property ladder because you can’t quite save enough to put down a large deposit on your dream home, 95% LTV mortgages may provide the answer to your problem. These allow prospective homebuyers just like you to purchase a property without paying a large sum upfront.

A 95% loan-to-value mortgage can be difficult to secure, though, so you’ll need to do your research and tread carefully. Having an expert mortgage broker on hand to walk you through the process can also be very beneficial, as they’ll be able to properly assess your situation and find the perfect mortgage product to suit it.

Here at The Mortgage Genie, we’ve helped lots of our clients purchase their properties with a 95% LTV mortgage in the UK and we would love to help you do the same! If you would like our support, get in touch with our team today by calling us on 033 33 44 33 72 and we’ll be waiting to make your plans a reality.

We’re sure you still have lots of questions about the 95% LTV mortgages available and how you can access one, though, so we’ve also put together this guide to answer them. Here, we’ll cover:

• What is a 95% LTV mortgage?
• Are 95% LTV mortgages available?
• What is the government’s 95% LTV mortgages guarantee scheme?
• Are 95% LTV mortgages only for first-time buyers?
• What are the pros and cons of a 95% LTV mortgage?
• Can you get a 95% LTV mortgage with bad credit?
• Can you get a 95% LTV when you remortgage?
• Can you get a 95% LTV shared ownership mortgage?
• Can you get a buy-to-let mortgage with a 95% LTV?
• How to find the best 95% LTV mortgage
• How to apply for a 95% LTV mortgage

Read on to learn everything you could possibly need to know about applying for a mortgage with a 95% LTV, so you’re suitably prepared for your house buying journey!

What is a 95% LTV mortgage?

With a 95% LTV mortgage, you can borrow up to 95% of the value of the property you’re looking to purchase. This means you will only need to have saved a deposit that’s worth 5% of the value.

LTV stands for loan-to-value. So, when we say you have a 95% loan-to-value mortgage, we mean that your mortgage has been taken out for 95% of your property’s price.

Traditionally, you needed a deposit of at least 10% to get on the property ladder, so only having to save a 5% deposit is sure to help more people buy properties sooner. It is worth noting that your options will be more limited and the interest rates of 95% LTV mortgages can be on the higher side, though, as the best deals are typically reserved for those with larger deposits. But, there are still competitive rates that will be available to you.

Hiring a mortgage broker to help you find the perfect mortgage product is the most effective way to ensure you can access the best possible deal for your circumstances.

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Are 95% LTV mortgages available?

The short answer is yes, there are 95% mortgages available on the market. They were previously quite rare — especially during the first two years of the coronavirus pandemic when lenders were trying to avoid taking any unnecessary risks. But they have become more readily available over the last year, and it’s likely we’ll see more 95% LTV mortgage products pop up over time.

This is primarily down to the UK government introducing a 95% mortgage guarantee scheme, which provides banks and building societies with more protection when offering these products.

What is the government’s 95% LTV mortgages guarantee scheme?

On 19 April 2021, the UK government introduced its new 95% mortgage scheme. Over the last few years, its roster of Help to Buy schemes has expanded quite dramatically, and this was a welcome addition that gives a helping hand to those who have only been able to save a 5% deposit. It’s available to those looking to buy a house worth up to £600,000.

This scheme provides lenders with a guarantee so they can provide aspiring homeowners with 95% LTV mortgages, subject to affordability checks. And, from the beginning, a number of large lenders and high street banks have been onboard, including Lloyds, Barclays, and HSBC. Many other companies have joined the scheme since the initiative was put into place, too, and it’s likely we’ll continue to see lenders take advantage of the protections the guarantee provides.

Are 95% LTV mortgages only for first-time buyers?

While first-time buyers are likely to benefit the most from the availability of 95% LTV mortgages, they aren’t the only people who can take advantage of these products. Even if you’ve owned a home before, you can buy a property with a 5% deposit.

What are the pros and cons of a 95% LTV mortgage?

Purchasing a property is a huge investment, so you need to choose your mortgage product very carefully. This means, if you’re considering taking out a 95% LTV mortgage, it’s vital that you consider all of the different pros and cons associated with this.

Here, we’ll talk you through the advantages and the disadvantages so you can make an informed decision.

Pros of a 95% LTV mortgage

Depending on your situation, securing a 95% LTV mortgage can be a very smart decision. Here are the main upsides to going down this route:

• You will require a smaller deposit
• It’s likely you’ll be able to purchase a property sooner
• While the interest rates of 95% mortgages tend to be on the higher side, the monthly cost will usually be lower than privately renting
• If you take out a fixed-rate mortgage, you can lock in the best rate available, so you don’t get any nasty surprises

Essentially, if you’re currently renting or living at home with family and want to start investing in your future, but aren’t in a position to save a large deposit any time soon, a 95% LTV mortgage could be a great option for you.

Cons of a 95% LTV mortgage

Now, let’s take a look at some of the downsides of taking out a 95% LTV mortgage, so you truly understand what to expect and can make an informed decision about whether one is going to make the best choice for you.

• 95% LTV mortgages tend to come with a higher interest rate
• Your monthly repayments are likely to be larger than if you put down a bigger deposit
• If you’ve been struggling to save a deposit for your home, you may find it hard to cover all the additional fees and charges associated with buying and owning a property
• There may be a cap on how much you can borrow with a 5% deposit, which can put some limitations on which properties you’ll be able to afford

It’s well worth carefully considering all of these points before beginning your mortgage application process, so you understand exactly what you’re getting into and what kinds of limitations you might face along the way.

Can you get a 95% LTV mortgage with bad credit?

If you have bad credit, you might find that it’s considerably harder to secure a 95% LTV mortgage than if you'd saved more for another product like a 90% LTV mortgage, but it definitely isn’t impossible.

Unfortunately, it’s likely you’ll find most mortgage providers will reject your application if you try to secure a mortgage with a 5% deposit and a poor credit rating. This is because they’ll see you as a high-risk borrower. There will be some companies still willing to lend to you, though, and there are even mortgage products that have been designed specifically for people in your position. An expert mortgage broker will be able to find these for you.

However, it is worth noting that taking out a mortgage with a small deposit and adverse credit can be more expensive. So, if you’re looking to get the best deal possible, we would always recommend trying to save more for your mortgage deposit and improve your credit score before applying if possible.

Can you get a 95% LTV when you remortgage?

Remortgaging your current home with a 95% LTV certainly won’t be easy, but it isn’t impossible, either. It’ll just require some serious planning and preparation.

The majority of lenders won’t provide you with a 95% remortgage, because they will expect you to have built up more equity in your property. But, there are more niche mortgage providers that do offer the kinds of deals you’re looking for, and a mortgage broker should be able to help you find them.

Under certain circumstances, you may even be able to take the route of remortgaging through the government’s mortgage guarantee scheme. While it isn’t particularly common, lenders can make their mortgage guarantee deals available to those looking to remortgage. It can certainly take some digging to find mortgage products along these lines, but it’s well worth speaking to a mortgage broker about this if you’re looking to remortgage your existing home any time soon.

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Can you get a 95% LTV shared ownership mortgage?

Because shared ownership mortgages are designed for people with lower incomes and less means to save, you will typically find that you can secure one with a 5% deposit. Like with most types of mortgages, it can be more difficult, but it’s possible.

It is worth noting that, when buying a shared ownership property, the deposit you put down will only be for the percentage that you’re initially trying to buy. So, depending on the value of the property you’re interested in and what proportion of it you’re looking to purchase to begin with, you may actually find that your deposit is bigger than expected. For more information about this, make sure you also check out our guide to shared ownership mortgages. If you're a council home resident, another alternative to consider would be Right to Buy.

Can you get a buy-to-let mortgage with a 95% LTV?

It’s very unlikely you’ll be able to secure a buy-to-let property with a 5% deposit, because purchasing a property to rent out is seen as a business transaction. You’ll typically be required to put down a 25% deposit, although some lenders will accept 20%.

How to find the best 95% LTV mortgage

While you can definitely do your own research and speak to the lenders who are already on your radar to determine where you’re going to get a great deal, the best 95% LTV mortgages can typically only be found through well-connected mortgage advisors. So, it’s always best to speak to an expert mortgage broker who can find you the perfect mortgage product that otherwise wouldn’t be available to you.

Having the help of a mortgage broker can be invaluable, as they’ll be able to consider all of the relevant factors, including how much you’re looking to borrow, how much you have saved, what your credit rating looks like, and how long you would like to be making repayments for. Then, they can use their knowledge and expertise to point you in the direction of the deal that’s going to tick all the right boxes for you.

How to apply for a 95% LTV mortgage

You can apply directly to a lender for a 95% LTV mortgage, or you can do this through a mortgage broker who will help you to complete all of the necessary paperwork and ensure your application has the best possible chance of being accepted.

You will also need to go through the typical affordability and credit checks associated with applying for any type of new mortgage.

For more information about what the application process will look like and what you will need to prepare, make sure you read our extensive guide on how to get a mortgage. Every step you’ll go through is outlined there, so you’ll know exactly what to expect.

We hope we’ve been able to answer all of the questions and address any concerns you previously had about applying for and securing a 95% LTV mortgage.

At The Mortgage Genie, we have a team of expert mortgage brokers who are skilled in handling cases just like yours. So, if you have any further queries, or you would like us to support you in finding the perfect mortgage to suit your needs, get in touch with us today by calling 033 33 44 33 72. We’ll be waiting to hear from you so we can get started on helping you to purchase your dream property!