How to buy a house with 5% deposit?
What percentage should a deposit be to buy a house?
The contract of sale states: "The buyer is to pay or send a deposit of 10 per cent of the purchase price no later than the date of the contract" . However, you can agree to a 5% deposit on the exchange of contracts if you are getting a 95% mortgage.
The government launched a mortgage guarantee scheme to support home buyers with a lower deposit deposit. The mortgage guarantee scheme is available with several high-street banks, including Lloyds, Santander, Barclays, HSBC and NatWest. The scheme is planned to run until 30 June 2025, though it can be closed sooner than this.
The guarantee protects the bank, not the borrower if the borrower doesn't repay the mortgage in full to the lender on voluntary sale or repossession. Where there is a shortfall, the government reimburses the mortgage lender.
Are you eligible for a 95% mortgage?
This mortgage guarantee scheme is available to first-time buyers or home movers, and the specific eligibility criteria are:
- purchase price of no more than £600,000
- not a new build property
- loan-to-value (LTV) of between 91% and 95%
- deposit between 5-9%
- residential mortgage (not a buy-to-let mortgage)
- repayment mortgage (not an interest only)
For first-home buyers, the 5% deposit mortgage guarantee scheme makes home-buying more affordable.
How much deposit do I need for a house worth £300,000?
You can buy a £300,000 property using a 5% deposit of £15,000; however, some sellers will ask you to pay a 10% deposit of £30,000.
You might be tempted to ask the estate agent before you offer if the seller will accept a 5% deposit, which may make the seller nervous about selling to you. It is best to leave it until your offer is accepted and you have your mortgage offer. The seller is more likely not to be bothered once they know you can afford the property with a mortgage.
Read more - How to make an offer on a house.
Buying with a 5% deposit calculator
Find out the deposit amount and how many years it'll take to save for a 5% house deposit.
Use our FREE online mortgage calculator to see how much your monthly mortgage repayment will be on a 95% mortgage.
How to apply for a 5% deposit mortgage?
You can apply directly with the bank using their online application form or a mortgage broker to help. The benefit of a mortgage broker is that they'll complete the mortgage application for you. You can apply using our panel mortgage broker here.
Here are some links to apply directly online:
- Natwest Bank Plc
- Barclays Bank Plc
- HSBC Bank Plc
- Co-Operative Bank Plc
- Yorkshire Building Society
- Nationwide Building Society
- Royal Bank of Scotland
- Lloyds Bank Plc
What are the Pros and Cons of a 5% house deposit?
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Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
