Getting A Mortgage With A Low Deposit | How To Guide | UK Mortgages

Welcome back to the WIS channel and podcast! My name is Gemma, and here we talk about money, mortgages, and positive money mindset.

Today’s episode focuses on deposits for first-time buyers and how these affect your mortgage. We have Ifthi joining us — an accountant and mortgage advisor with over 10 years’ experience, and one of the founding directors at WIS.

1. What is a Deposit?

Gemma: One of the most common questions from first-time buyers is, what is the deposit amount?

Ifthi:

The deposit is your minimum contribution towards buying a property.

Lenders usually start from 5% deposit:

Example: For a £100,000 property, a 5% deposit is £5,000.

The lender provides the remaining £95,000 as a mortgage.

You cannot get a 100% mortgage, so a minimum deposit is always required.

2. What is Loan-to-Value (LTV)?

Gemma: A lot of people see LTV on comparison websites but aren’t sure what it means.

Ifthi:

LTV represents the loan as a percentage of the property value.

Example:

• £5,000 deposit on a £100,000 property → £95,000 mortgage → 95% LTV
• £10,000 deposit → £90,000 mortgage → 90% LTV

3. What is the Minimum Deposit Required?

Gemma: What is the minimum deposit required for a mortgage currently?

Ifthi:

The minimum deposit is 5%, which is good news for first-time buyers.

Last year, 5% mortgages were rare due to lenders being cautious post-COVID.

The government introduced a 5% guarantee scheme, giving lenders more confidence.

Many banks have independently introduced 5% deposit mortgage schemes, making it more accessible for buyers.

4. Does a Small Deposit Affect the Amount I Can Borrow?

Gemma: What happens if I have a smaller deposit?

Ifthi:

Smaller deposits can reduce borrowing capacity because:

• Lenders use income multiples (e.g., 4.5–5x income).
• With a smaller deposit, the income multiple may be reduced (e.g., 4.25x instead of 4.5x).

A clean credit score is important for 5% deposits; otherwise, lenders may:

• Require a higher deposit (10–15%)
• Propose alternative lending options

Speak to an advisor before running a hard credit search to avoid affecting your credit file.

5. What Are Alternatives if I Don’t Have Enough Deposit?

Gemma: What options exist for those needing a larger deposit?

Ifthi:

Help to Buy scheme:

• You contribute 5%
• Government contributes 20% → total 25% deposit
• Easier credit scoring for lenders
• Must buy a new property

Family support:

• Parents or close family can contribute to the deposit
• Joint Borrower Sole Proprietor (JBSP) mortgages:
• Parents’ income and credit help with the mortgage
• Your name remains the sole owner

Helping Hand mortgages:

• Lenders can offer up to 5.5x income
• May require 10% deposit to start
• Credit scoring may be stricter
• Multiple lenders now offer these products

6. How Can I Increase a Smaller Deposit?

Gemma: If I have a small deposit, how can I increase it?

Ifthi:

Save as much as possible and cut discretionary spending temporarily.

Use government schemes like Lifetime ISA:

• Government adds 25% bonus to your savings
• Example: Client saved £4,000 → government bonus made up the 5% deposit for a £100,000 property

Combine family help (contributions or JBSP mortgage) with your savings.

Final Notes

Gemma:

These points may not apply to everyone. Speak to an advisor to see if they are suitable.

Reminder: A mortgage is secured against your home, and non-payment may lead to repossession.