What is a 95% Mortgage?

With a 95% mortgage, the buyer borrows most of the property’s purchase price from a lender and contributes a relatively small deposit. Monthly repayments then cover the interest and, depending on the type of mortgage chosen, part of the capital borrowed.

Because the buyer’s stake in the property is small at the outset, the lender is taking on greater risk. For this reason, interest rates and fees for 95% mortgages are often higher compared to products at lower loan-to-value (LTV) levels, such as 85% or 75% mortgages.

Lenders will also apply thorough affordability checks. This involves looking at income, regular outgoings, credit commitments, and credit history. Even though the deposit is smaller, customers must still demonstrate they can comfortably afford the monthly repayments.

Who is Eligible for a 95% Mortgage?

A 95% mortgage is usually aimed at first time buyers, though it can also be available to existing homeowners looking to move. Eligibility criteria will vary between lenders, but typically include:

• Stable income: Lenders prefer applicants in steady employment or with reliable self-employed income records.
• Good credit history: Missed payments, defaults, or CCJs can make approval more difficult.
• Deposit proof: The 5% deposit must usually be from savings or gifted family support, not borrowed from a loan.
• Affordability: Lenders will test whether applicants can still make repayments if interest rates rise.

Each lender has its own approach, which is why guidance from a mortgage advisor can be helpful to identify the most suitable options.

Government Support for 95% Mortgages

Government intervention has played an important role in increasing the availability of 95% mortgages.

In addition, buyers may also be able to combine a 95% mortgage with other government initiatives, such as First Homes or Shared Ownership, depending on eligibility. These schemes are designed to support people who might otherwise struggle to take their first steps onto the property ladder.

Benefits of a 95% Mortgage

The primary advantage of a 95% mortgage is accessibility. With just a 5% deposit required, buyers who might otherwise spend years saving for a larger deposit can purchase sooner.

Another benefit is that owning a property allows buyers to build equity over time rather than continuing to pay rent. Even though repayments may be higher compared to lower LTV mortgages, money is going towards owning an asset rather than a landlord.

For many, a 95% mortgage is a stepping stone. After a few years of repayments and potential property value growth, buyers may find themselves in a lower LTV bracket. This can open the door to more competitive mortgage products when they come to remortgage.

Risks and Considerations

While the benefits are clear, there are important considerations to weigh up before committing to a 95% mortgage:

• Higher monthly repayments: With a smaller deposit, the loan amount is higher, which means bigger repayments.
• Interest rates: 95% mortgages often come with less competitive rates compared to products at 85% or 75% LTV.
• Negative equity risk: If property values fall, the amount owed could become greater than the property’s worth, making it harder to remortgage or sell.
• Fewer choices: Although the market has improved, there are still fewer 95% mortgage products compared to lower LTV brackets.

Understanding these risks in advance helps customers make informed choices and plan for the long term.

Alternatives to a 95% Mortgage

For some buyers, a 95% mortgage may not be the most suitable fit. Alternative routes include:

• Saving for a larger deposit: Waiting longer may allow access to lower rates and reduced repayments.
• Shared Ownership: Buyers purchase a percentage of the property and pay rent on the remainder.
• Family support: Some lenders offer family-assisted mortgages, where a parent’s savings or property equity is used as security.
• First Homes scheme: Certain new-build properties are offered at discounted prices to eligible buyers.

Each of these options comes with different benefits and drawbacks, but exploring them ensures buyers don’t miss a potentially better solution.

How a Mortgage Advisor in Leicester Can Help

Navigating the mortgage market can be daunting, especially when comparing products with different criteria, rates, and fees. A mortgage advisor can assess a customer’s individual situation, explain the full range of available options, and recommend a product that matches both current needs and long-term goals.

For first time buyers in Leicester considering a 95% mortgage, professional guidance can be particularly valuable. An advisor will understand which lenders are most likely to approve an application, help prepare the paperwork, and provide support throughout the process. This can make the difference between a smooth experience and unnecessary stress.

Is a 95% Mortgage Right for You?

A 95% mortgage can be an excellent solution for buyers who are eager to step onto the property ladder but cannot save a larger deposit. It makes home ownership more achievable, especially for younger buyers and those on modest incomes.

That said, it does come with higher costs and greater risk compared to lower LTV products. The decision should therefore be based on careful consideration of current affordability, future stability, and long-term goals.

Speaking to a mortgage advisor in Leicester can provide clarity, ensuring customers understand all the available options and make a decision with confidence.

Date Last Edited: October 10, 2025