Discover The Best 95% LTV Mortgages
- Written by Steve Roberts
- Edited on
While 95% loan-to-value (LTV) mortgages might not always offer the lowest interest rates due to their high LTV, they do make buying a home more accessible if you’re unable to save a larger deposit.
Our guide dives into the details of 95% LTV mortgages, explaining the benefits, eligibility criteria, and rates you might see. And if you’ve got questions after going through our guide, our mortgage team is here to help without charge.
What is a 95% LTV Ratio Mortgage?
What does a 95% LTV mortgage even mean? It’s a way to buy a house without saving up a large deposit. When you get a mortgage like this, you only need to produce 5% of the overall cost as your deposit. The bank or lender then takes care of the other 95%. This is great if you want in on that property game but aren’t exactly sitting on top of mountains of money. These mortgages tend to have higher interest rates than those with lower LTVs. But that’s just because the lender is taking on more risk by covering more property costs.
An example of a 95% Mortgage with a 5% Deposit
Now that you know that to qualify for a 95% loan-to-value mortgage, you will need a 5% deposit, let’s give a real-world example.
Here’s an example: Say there’s a place on the market for £250,000 and you’ve got your eye on it. With a 95% LTV mortgage, you’d only need to put down £12,500 (5%) and the lender would provide the remaining £237,500. Easy peasy way to become a homeowner when you maybe don’t have as much money saved up as you’d like.
The Best 95 LTV Mortgage Rates
Check out the best mortgage interest rates below for a 95% loan-to-value (LTV) ratio. This interest rates table is accurate as of 3rd April 2024, but rates are subject to change, so don’t wait too long to contact our free mortgage advisors to lock in a rate.
| Lender | Initial Rate | Initial Payment | Reverting Rate | Reverting Payment | Total Fees | Type | APRC | Total Cost |
|---|---|---|---|---|---|---|---|---|
| Furness Building Society | 3.56% | £1,196.74 | 8.69% | £1,862.57 | £20 | 2 Year Fixed | 7.4% | £28,592 |
| Skipton Building Society | 5.38% | £1,441.49 | 6.79% | £1,626.13 | £20 | 2 Year Fixed | 6.6% | £34,671 |
| Lloyds Bank | 4.75% | £1,354.03 | 8.74% | £1,885.11 | £0 | 3 Year Fixed | 7.7% | £50,660 |
| Halifax | 4.80% | £1,359.51 | 8.74% | £1,884.08 | £0 | 3 Year Fixed | 7.7% | £50,859 |
| Skipton Building Society | 4.90% | £1,374.60 | 6.79% | £1,600.49 | £20 | 5 Year Fixed | 6.1% | £82,551 |
| Vernon Building Society | 4.99% | £1,387.02 | 8.10% | £1,769.82 | £15 | 5 Year Fixed | 6.9% | £83,391 |
The mortgage examples given are for buying a property valued at £250,000 with a mortgage of £237,500 over a 25-year period, equating to a 95% Loan to Value (LTV) ratio. It’s important to remember that actual rates and terms may vary based on personal financial conditions and fluctuations in the market. The numbers provided should be seen as indicative and for guidance purposes only; for advice that specifically suits your situation, it’s best to speak with a professional.
The Pros and Cons of a 95% LTV Mortgage
Purchasing a home with a 95% LTV mortgage poses many pros and cons. The option makes it more possible for first-time buyers to become homeowners with a small upfront deposit. But this choice also ties buyers to tricky terms and costs that will impact their financial future. Knowing the good and bad of 95% LTV mortgages is key in deciding whether this financing path aligns with your personal and financial goals. Here’s an impartial look at its positive and negative sides:
Pros of a 95% LTV Mortgage
- Smaller Deposit: A 5% deposit allows you to own a home, making it possible for those with little savings.
- More Accessible Homeownership: A lower initial financial gate allows more people into the real estate market faster than they initially thought. This explicitly benefits first-time buyers.
- Growth in Property Value: Owning property without significant equity stakes doesn’t prevent you from benefitting from price increases over time, which could improve your finances in the long run.
- Broader Array of Products: In recent years, lenders have reintroduced more products into the market, giving buyers more choices when it comes to finding one that suits them best based on their circumstances and preferences—despite higher interest rates.
Cons of a 95% LTV Mortgage
- Higher Interest Rates: Lowering your LTV means lowering interest rates, too. So, small deposits naturally come with significantly higher borrowing charges, not just on paper but also in monthly payments.
- Increased Overall Cost: Added interest and potential for mortgage insurance skyrockets total borrowing costs. Long-term affordability takes a massive hit, along with total interest paid over the life of your mortgage.
- Risk of Negative Equity: When housing markets plunge, homes can be worth less than their value on paper, leaving owners drowning in debt that exceeds their entire assets, a condition called negative equity. And if you’ve only invested small capital upfront, this is something to be deeply concerned about.
- Stricter Qualification: To lessen the risk linked with high LTV lending, lenders may impose more stringent credit and income criteria, making it difficult for some borrowers to get approved.
Anyone considering a 95% LTV mortgage must know the pros and cons. Contact a mortgage adviser for professional guidance if you’re looking into purchasing a home. They’ll help you explore all your options to find the best path forward based on your unique situation and homeownership goals.
The Pros and Cons of a 95% LTV Mortgage
Purchasing a home with a 95% LTV mortgage poses many pros and cons. The option makes it more possible for first-time buyers to become homeowners with a small upfront deposit. But this choice also ties buyers to tricky terms and costs that will impact their financial future. Knowing the good and bad of 95% LTV mortgages is key in deciding whether this financing path aligns with your personal and financial goals. Here’s an impartial look at its positive and negative sides:
Pros of a 95% LTV Mortgage
- Smaller Deposit: A 5% deposit allows you to own a home, making it possible for those with little savings.
- More Accessible Homeownership: A lower initial financial gate allows more people into the real estate market faster than they initially thought. This explicitly benefits first-time buyers.
- Growth in Property Value: Owning property without significant equity stakes doesn’t prevent you from benefitting from price increases over time, which could improve your finances in the long run.
- Broader Array of Products: In recent years, lenders have reintroduced more products into the market, giving buyers more choices when it comes to finding one that suits them best based on their circumstances and preferences—despite higher interest rates.
Cons of a 95% LTV Mortgage
- Higher Interest Rates: Lowering your LTV means lowering interest rates, too. So, small deposits naturally come with significantly higher borrowing charges, not just on paper but also in monthly payments.
- Increased Overall Cost: Added interest and potential for mortgage insurance skyrockets total borrowing costs. Long-term affordability takes a massive hit, along with total interest paid over the life of your mortgage.
- Risk of Negative Equity: When housing markets plunge, homes can be worth less than their value on paper, leaving owners drowning in debt that exceeds their entire assets, a condition called negative equity. And if you’ve only invested small capital upfront, this is something to be deeply concerned about.
- Stricter Qualification: To lessen the risk linked with high LTV lending, lenders may impose more stringent credit and income criteria, making it difficult for some borrowers to get approved.
Anyone considering a 95% LTV mortgage must know the pros and cons. Contact a mortgage adviser for professional guidance if you’re looking into purchasing a home. They’ll help you explore all your options to find the best path forward based on your unique situation and homeownership goals.
Mortgage Types with a 95% LTV
As a full-service mortgage broker, we have access to a wide range of lenders in the market, so we’re well-placed to find the best mortgage for your financial situation. When it comes to 95% LTV mortgages, here are the main types we consider:
Variable Rate Mortgage
Opting for a variable rate may bring down your initial costs, but be prepared for monthly mortgage payments that can vary over time. We look at different types of variable rates:
- Tracker rate mortgages: These mortgages have their interest rates linked to an external benchmark, typically the Bank of England’s base rate. This means your monthly repayments can increase as the base rate changes.
- Discounted variable rate mortgages: You’re offered a discount off the lender’s standard variable rate (SVR) for a set period. Your monthly repayments will also fluctuate as and when the SVR changes.
- Your lender’s standard variable rate (SVR): Most mortgages revert to the lender’s SVR after any initial mortgage deal period. This can change at your lender’s discretion but often reflects broader movements in interest rates.
Fixed Rate Mortgages
If you want certainty over what you’ll pay monthly, fixed-rate mortgage deals lock in your interest rate for a set period. That stability is beneficial when planning outgoings in the early years of homeownership. And don’t forget to consider remortgaging to another fixed deal towards the end of your term – or earlier if necessary – so you’re not moved onto a higher SVR.
Interest Only Mortgages
With these mortgage deals, you only pay off each month’s interest on the loan and none of the capital balance itself. As such, they offer lower monthly payments during the term but require a credible repayment strategy for repaying that capital balance at maturity. Interest-only options at 95% LTV are less common and come with specific lender criteria as well as repayment plan requirements.
As part of our service, we look at all the options that will be best for you. Whether you’re navigating the unpredictability of interest rates with a variable-rate mortgage, enjoying the security of a fixed rate, or benefiting from the lower monthly outgoings of an interest-only mortgage, we’ll help you make your choice and negotiate the best possible terms on a 95% LTV basis.
What Is the Criteria for a 95% Mortgage?
Are you looking for a 95% LTV mortgage and unsure if it’s right for you? Take a good, hard look at your finances. Here’s what to think about:
Can You Scratch Together 5%?: That’s the minimum deposit you’ll need to secure this type of loan. It’s also the start of your mortgage application.
Do Monthly Payments Work?: Expect higher interest rates and, thus, steeper monthly payments with this type of mortgage. Make sure you can afford them without breaking the bank.
Can You Cover Extra Costs?: Remember that the property price isn’t the only home cost—budget for stamp duty, valuation fees and ongoing maintenance.
How’s Your Financial Health? Lenders examine how stable your income is and how secure your job is before they approve you.
Applying for a 95% LTV mortgage means diving into the nitty-gritty of your finances. Make sure you’re ready not just now but well into the future. If all this talk sounds like gibberish to you, speaking with an advisor could set you on the right track so that you can feel confident moving forward.
There may be other options open to you, such as guarantor mortgages. This may allow you to look at higher property prices with the help of a family member.
How Much Can I Borrow With a 95% Mortgage?
A 95% mortgage sounds excellent on paper, but it has some strings. Primarily, lenders calculate the loan amount based on your annual income, typically allowing you to borrow around 4 to 4.5 times this amount. However, they will thoroughly examine your outgoings to ensure you can comfortably manage the mortgage repayments.
So what does this mean for you? If you’re hoping to live in a house beyond your means and still be able to afford it comfortably, you might have another thing coming. You should review and possibly adjust your spending habits three to six months before applying for the mortgage.
Discover how much your can afford with our Mortgage Affordability Calculator.
Your credit history also plays a role when determining how much money they’ll lend you. They want to ensure the potential borrower can handle their debt accordingly. So, with that being said, now’s not the time for any surprises on your credit score or anything else like that.
The Importance of Monthly Mortgage Payments
Finally, we must discuss monthly repayments and how they affect you long-term. We know it’s easy to slap numbers into an equation and focus on getting approved for something! But don’t let yourself get too carried away here. Ensuring that the payments are made easily doesn’t just give you financial peace of mind; it sets up a solid future for yourself.
It allows you to maintain a healthy financial balance, ensuring that if anything happens financially where all of a sudden money is tight, at least everything isn’t tied up in your home purchase so tightly.
You build equity in your property more effectively, which is crucial for future financial flexibility.
Lastly, it keeps those credit scores high, which everyone knows by now is vital when trying to borrow in the future!
Regular, on-time mortgage payments are also essential for maintaining a good credit score, which can affect your ability to borrow in the future. Before finalising a 95% LTV mortgage, consider the long-term impact of these monthly repayments on your overall financial planning and lifestyle.
Discover how much your monthly mortgage payments could be with our Mortgage Repayment Calculator.
How To Get The Best 95% LTV Mortgage Deals
Finding the perfect 95% loan-to-value (LTV) mortgage is tricky. The market is vast and varied. But here are some tips to help you get started:
Go Direct: Many High Street Banks provide mortgage assistance directly, but smaller lenders can also be helpful. You could spend hours pestering lenders or have the answers handed to you on a plate by using a broker.
Talk to a Broker: We compare thousands of mortgages from over 80 different lenders for free in just a few taps. Our team of experts will have your back every step of the way.
Online Comparison Sites: The internet has thousands of pages helping you find the best bargain. However, take them with a pinch of salt; they don’t show you every lender.
If you’re as confused as ever by this point, don’t worry — it’s normal! But follow these steps, and with time, patience and maybe a little luck, we’ll get together.
What is The Mortgage Guarantee Scheme?
Government-backed initiative Mortgage Guarantee Scheme (MGS) aids homebuyers in securing up to 95% loan-to-value (LTV) mortgages with a minimal 5% deposit. How? Giving lenders a government-supported guarantee minimises their losses, thus urging them to offer higher LTV loans and making accessibility for buyers easier.
Here’s what you need to know about the mortgage guarantee scheme:
Purpose: To make homeownership more accessible with smaller deposits.
Beneficiaries: Serves first-time buyers and existing homeowners alike.
Availability: Results on a broader selection of 95% LTV mortgage products on the market.
Interest Rates: May go up due to the greater risk of smaller deposits.
Eligibility and Repayment: Specific criteria must be met, and borrowers are responsible for maintaining mortgage payments since the guarantee is only in favour of the lender.
With this streamlined approach, the mortgage guarantee scheme makes homeownership doable for those who might otherwise find it impossible, which means many prospective buyers now have an option.
95% LTV Mortgages for First-Time Buyers
For many first-time buyers, coming up with enough cash for a big deposit is the most significant barrier to entry. That’s where 95% LTV mortgages come in, bringing the dream of homeownership within reach as a first-time buyer with a much smaller cash outlay. Not only do these loans unlock better interest rates, but they’re also easier to get approved for.
Why It’s a Win for First-Time Buyers:
You Don’t Need a Huge Deposit: Five per cent will get you in the door—and make it much easier to take that first step on the property ladder.
Decent Rates Are Still on the Table: Even if your loan-to-value ratio is high, you can score some competitive interest rates.
More Homes Within Reach: With more borrowing power comes more options. You’ve got a more extensive playground of properties to choose from.
Your Investment Could Grow: Just because you start with little equity doesn’t mean your pad won’t appreciate over time.
Extra Help for First-Timers: Many lenders have special offers to help first-time buyers land their first home, so finding something that suits them should be less complicated.
In short, 95% LTV mortgages are game-changers for anyone who wants to buy their first home without spending years saving up for a hefty deposit. They’re considered First Time Buyer Mortgages and are tailored to help make the initial step onto the property ladder less steep.
Remortgaging with a 95% LTV
Feeling the itch to redo your mortgage? A 95% LTV remortgage could be just the ticket. If you’ve found yourself in a fortunate position where your home’s value has skyrocketed, or finances have fallen into place, a 95% LTV remortgage could help you turn things around. By cutting down on what you owe across different types of debt, fixing up your crib, or swapping out an SVR for something more predictable (and often cheaper), you’ll be on a much smoother track to greatness.
Advantages of Remortgaging at 95% LTV:
Knocking Out Debts: Use the money you make off of the equity from your home to pay off debts at potentially better interest rates.
Boosting Value: With this cash injection, you can upgrade your kitchen or add a conservatory, which will help raise your home’s value!
Avoid a High SVR: Getting locked into a lender’s SVR can sometimes feel like being stuck behind bars; swap it out for a fixed-rate deal, save yourself from random rate hikes, and smooth out your monthly spending.
Remortgaging with a 95% LTV isn’t just about scoring a better deal—it’s an opportunity to get your finances in order while adding some severe worth to your humble abode.
Can You Get a 95% Mortgage on a Buy-to-Let Property?
95% LTV mortgages are typically not available for buy-to-let properties due to:
- Higher Risk: Buy-to-let mortgages are seen as riskier by lenders.
- Regulatory Restrictions: Not regulated by the FCA for commercial or investment properties.
- Rental Income Requirements: Lenders expect rental income to cover mortgage payments significantly.
- Market Availability: A limited number of lenders offer high LTV products for buy-to-let investments.
For buy-to-let mortgages, the minimum usually required deposit is around 25%, translating to a maximum LTV of 75%. This varies based on the lender and the borrower’s circumstances. Consulting with a financial advisor or mortgage broker is advisable for tailored advice and to explore suitable financing options.
Did you know there are such things as 100% LTV Mortgages
Frequently Asked Questions
Is 95% LTV Good?
The 95% LTV is helpful to buyers with small deposits, which can help you own a home. However, a small deposit comes with higher interest rates and monthly payments because of the more significant risk it presents to lenders. If house prices were to go down, your equity would decrease rapidly.
How Much Can You Borrow on a 95% Mortgage?
A few things come into play when determining how much you’ll borrow for your mortgage. Some of these include the lender’s criteria, how big your income is, how many debts you have, and your credit score. Mortgage lenders will use this information to calculate the maximum loan amount on a repayment mortgage.
Which Lenders Do 95% Mortgages?
High street banks and building societies are known for their 95% mortgages and offer them often through the Mortgage Guarantee Scheme. Listed below are some notable lenders that offer 95% mortgages:
Barclays
Halifax
HSBC
NatWest/Royal Bank of Scotland
Santander
Virgin Money
Remember that availability from any mortgage provider depends on your credit score, income, property price and type, and current market conditions. It is only available for residential properties; you must meet their policies to get one. We understand this may allow you to get on the property ladder sooner, so talk to an advisor or directly with the lenders themselves if you want answers.
Can Anyone Get a 5% Mortgage?
Not everyone will be accepted for a 5% deposit (95% LTV) mortgage. Eligibility factors include creditworthiness, income stability, and ability to meet the lender’s requirements. These mortgages are aimed at those who have solid finances but can only make small deposits on properties.
