Content Writer
Mortgage Advisor & Director
Saving for a mortgage deposit can be the biggest hurdle for many people hoping to get onto the property ladder. However, don’t lose hope, as there are options available for borrowers with a smaller deposit.
If you’re hoping to qualify for a mortgage with a £5k deposit, there are a number of products and schemes that could help you, especially if you’re a first-time buyer. We look at how much you could borrow with a £5,000 deposit, and how to compare the best deals available.
What size mortgage can you get with a £5k deposit?
Your mortgage loan is based on both the loan-to-value (LTV) ratio of your borrowing, how much you need to borrow compared to your deposit size, and your income. Lenders offering the highest LTV mortgages will allow you to borrow the greatest amount with a £5k deposit.
For example, if you took out a 99% LTV mortgage (or a 1% deposit mortgage), in theory, you could borrow up to £500,000 - as £5,000 would be 1% of that. However, keep in mind that your income would also need to meet the affordability criteria for a £500k property.
Generally lenders are looking for at least 5% deposit, however, depending on the property type and your circumstances. A more standard mortgage size for a £5k deposit would, therefore, be around £100,000.
Ways you could borrow more
With the average cost of UK homes currently around £300,000, and much higher in the South East, it can be difficult to get the size of mortgage you need with a small deposit. However, there are plenty of options available that may allow you to borrow more with a £5k deposit, depending on your circumstances:
Help from family
If you’re lucky enough to have parents, grandparents or other relatives who are able to help you buy your first home, there are a couple of types of mortgage that may allow you to borrow more with a £5k deposit than you could alone. These include guarantor mortgages, where a family member secures your mortgage against their property or offers enough of their savings to the lender to hold in guarantee of the mortgage for a defined period of time.
You could also consider a Joint Borrower, Sole Proprietor mortgage, which is where the income of multiple applicants is used to determine the loan amount, but only the main applicant (sole proprietor) appears on the property deeds. This is usually helpful for both low income and low deposit applicants.
Government schemes
If you’re not able to get help from your family, then a government scheme may help you to borrow more to buy a suitable home. There are a wide range of schemes, usually open to first-time buyers, but some are available to all applicants. They typically allow you to borrow more with a small deposit, so while they are not specifically aimed at borrowers with £5k, they could certainly help your deposit go further.
See our guide to UK mortgage schemes for more information about what’s available.
Specialist mortgage products
Yorkshire Building Society’s 5k Deposit mortgage, which is offered through their intermediary Accord, is aimed exclusively at first-time buyers with a £5k deposit. It’s also referred to as a 1% deposit mortgage, as loans of up to £500,000 are available with this scheme.
Here are the key features of this mortgage product:
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Deposit: £5,000+ (gifted deposits allowed from immediate family)
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Max property value: £500,000
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Max LTV: 99%
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Interest Rate: 5.99% on a 5 year fixed-rate deal - no shorter term deals available
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Eligibility: First-time buyers (although only 1 applicant needs to qualify as such on a joint application) both applicants must live in England, Scotland, or Wales
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Maximum Borrower Age: 70 at the end of the mortgage term
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Exclusions: flats and new-build properties
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Availability: Not available direct to customer, only through a broker. We can help you to access this product
Calculate your maximum borrowing
Although the maximum you could currently borrow with a £5k deposit is £500,000, you would also need to meet the affordability criteria in order to qualify for a loan of this size. Affordability is based on your annual income, and most lenders cap lending at between 4.5 and 5 times that income.
For example, if your annual household income is £50,000 and the lender allows you to borrow 5 times your income, you’ll likely be able to borrow around £250,000.
This can be slightly higher for those in a professional career, or with a very large deposit, but is unlikely at such a high LTV. You can use our affordability calculator to get a rough idea of your maximum borrowing on your current income. Remember to enter your total household if you are applying with someone else. Hit ‘Calculate’ to get some quick results based on four income multiples used by UK lenders:
Compare £5,000 deposit mortgages for free
You can compare all of the deals available on £5k deposit mortgages for free on Teito. When you source a mortgage through us, you can also discuss your mortgage options with one of our experienced brokers, which is highly recommended for low deposit mortgages.
Choose your preferred option below to get started on your mortgage journey:
Compare £5k deposit mortgage rates for FREE
What interest rate to expect
When it comes to mortgage rates, deals with a higher LTV tend to have a higher interest rate, so the amount of deposit you have can have a large impact. This is because there is more risk to the lender, the greater percentage of the property value you’re borrowing.
With a deposit of £5k it’s highly likely that you’ll be borrowing at 90-99% LTV, which is considered to be very high. Interest rates are, therefore, likely to be reflective of this.
Where can your deposit funds come from?
Usually people use their savings as a deposit, but it’s important to be able to prove where the funds came from. Every lender has their own rules when it comes to gifted deposits, however, many do accept them. Usually those gifting the deposit would have to be immediate family, and/or give written confirmation that the gift will not need to be repaid.
In some cases it may also be possible to use a loan or credit card, but the majority of lenders that do allow this will typically only allow this for the purpose of topping up a loan, not as the sole source of deposit. If you run your own business, it may also be possible to use a director’s loan as your deposit, although this won’t apply to all lenders.
Why choose Teito for your mortgage needs?
If you’re looking to secure the best mortgage with a £5k deposit, then it’s important to ensure you review all of the options available to you. At Teito you can compare mortgage rates for free, as well as benefit from an initial chat with one of our brokers, who specialises in borrowers just like you!
Our customers chose Teito for their mortgage needs because:
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You can view rates from 90+ mortgage lenders in seconds with us
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Our brokers specialise in a wide range of mortgages for first-time buyers, including those with smaller deposits, and may be able to secure exclusive deals
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We have a 5-star rating on leading review websites such as Google and TrustPilot
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Your initial consultation is totally free!
So what are you waiting for? Find out how we could help you make the best of your mortgage options today - get started here.
FAQs
Yes you can. There mortgage options referred to in this article are largely available across the UK, including Scotland. Although not all of the government schemes can be used outside of England, the products that allow family support and even the specialist Yorkshire Building Society £5k deposit mortgage product can be used in Scotland.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.