A simples guide

95% mortgages

Getting yourself on to the property ladder is an exciting time. But it can be difficult to save for the whopping deposit that’s often needed for a mortgage. Which is where the 95 per cent mortgage comes in.


The 95 per cent mortgage is specifically designed to help those that are struggling to save up what’s required – like first-time buyers – and, unsurprisingly, allows up to 95 per cent borrowing.  

So what is exactly is a 95 per cent mortgage?

It allows you to borrow up to 95 per cent of the value of the property you’ve got your heart set on buying. Sounds ace, right? Basically, house prices shooting up has meant more people are struggling to get on to the property ladder, which is why the 95 per cent mortgage deal was designed; to help those who want to achieve their goal but can only save enough for a 5 per cent deposit.

It’s proven to be especially useful for first-time buyers, not just in the financial sense, but also in the decision-making process as it slims down the number of mortgages to choose from, as there are fewer 95 per cent mortgage deals available. Of course you still get the choice of whether to go for a fixed rate or a variable rate.

A fixed rate lasts for two, three or five years and  the monthly repayments stay fixed, while a tracker means you’ll essentially be installing a tracker that may be in line with the Bank of England base rate, meaning monthly repayments will fluctuate in accordance with market movements i.e. go up or down each month in line with interest rates.



Is a 95 per cent mortgage right for me?

95 per cent mortgage rates are particularly enticing to first-time property buyers, largely thanks to the deposit being smaller. In some instances though, a 95 per cent mortgage may also be the preferred option for those folks simply looking to move home.   

However, 95 per cent mortgages are not always that easy to apply for. Some are designed just for first-time buyers only, while others have been set up for people who have registered with the government’s Help To Buy scheme, which is for those who can only manage to raise the 5% deposit and no more. It’s also worth considering that although you can usually borrow anything in the region of £50,000 and £500,000, a 95 per cent mortgage is a higher risk for a lender and often has higher interest rates than that of a mortgage with a lower Loan-to-Value ratio.

So it’s worth starting a mortgage quote and simply popping in your details to find out what mortgage works best for you. 

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What do I need to know before I apply?

A mortgage is likely to be the biggest financial commitment you’ll ever make, so you’ll need to get that thinking cap on and make some life changing decisions. No pressure! First off is deciding whether you want to go fixed or variable rate.

Then you’ve got to consider the interest rate and fees that come into effect, which as you’d imagine are higher for 95 per cent mortgage deals. On top of this, a smaller deposit brings with it fewer mortgage products that can be available to you. 

Be aware too, that lenders of mortgages at 95 per cent will require a mortgage indemnity guarantee (MIG); this is an insurance policy that the borrower is asked to pay to protect the lender against loss if you default on your mortgage.

Finally, make sure your credit score is in a healthy condition as this will be checked, as will your history of spending; lenders will want to see copies of bank statements just to gauge who they’re lending their money to. Get everything you need together and then let comparethemarket.com give you the options available that suit your needs. 

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