The 5% Deposit Mortgage Scheme & How They Work

roofs - 5% deposit mortgage blog

A mortgage presents many challenges to buyers, not least because saving up enough money for a deposit is incredibly difficult for most.

Savings accounts are paying low interest rates and wages on average aren’t rising with the rate of inflation making saving for a deposit even more of a struggle.

But the good news is that there are ways of saving enough deposit for a mortgage and one of the best schemes available is the 5% deposit mortgage scheme.

What is the 5% deposit mortgage guarantee scheme?

The 5% deposit mortgage guarantee scheme was introduced by the government on 3rd March 2021. It is designed to help those who are unable to save the 10% required for most mortgage products.

Sometimes known as a 95% LTV mortgage, the scheme allows first time buyers as well as some existing homeowners get a mortgage with just a 5% deposit. 

Currently there are a number of lenders that offer the 5% deposit mortgage scheme:

Why Was the Scheme Introduced?

According to Rt Hon Robert Jenrick MP, “For too many people, no matter how hard they work, home ownership can seem out of reach. One of the biggest divides in our country has been between those that can afford their own home and those who cannot.”

When the COVID-19 pandemic hit in 2019, many lenders panicked and began to re-assess their mortgage products. This resulted in a number of lenders withdrawing their 5% deposit mortgage products (not to be confused with the 5% deposit mortgage scheme).

A small handful of lenders even withdrew their 10% deposit mortgage products. The withdrawal of these products began to alarm the UK government who saw these mortgages as a lifeline for first time buyers.

In response the government decided to offer a guarantee for 5% deposit mortgages that mitigated the risks that the lenders were concerned about.

To be exact, the scheme allows the lender to recoup a portion of any losses from the government that can result from lending at a 95% LTV.

This includes things like repossession if you’re unable to pay the mortgage and a lender makes a loss trying to sell the property to pay off the debt.

Advantages and Disadvantages of the 5% Mortgage Scheme

The main advantage to buyers is that they can apply for a mortgage with a reduced deposit amount compared to standard mortgage products. For lenders they are able to protect themselves in the event the buyer can’t pay the mortgage.

The disadvantages of the scheme are that a buyer will still need to pass the affordability checks in order to make up the difference between the deposit and the property value. With the deposit being lower, this gap is larger so buyers will have to borrow more money.

In the event of repossession, while the lender has protection to some extent, the buyer has no protection whatsoever and all of the repercussions of repossession will impact the buyer.

How do I Get a 5% deposit mortgage?

To get the 5% mortgage scheme you can approach one of the lenders directly or if you prefer to find the best mortgage product you should use a broker.

A mortgage broker will compare all of the 5% mortgage scheme lenders and find the best interest rate and product for your circumstances. 

It is worth remembering that although the 5% deposit will be the same across participating lenders, the fixed rate terms and interest rates offered by each will be different.

For example, a 5% mortgage scheme with one lender might offer a 5-year fixed rate product that might not be suitable for you if you’re looking to get a 2-year fixed rate product.

If you’re approved for the scheme, you can use it for up to 7 years from your approval date.

A whole of market mortgage broker like Boon Brokers offers FREE no obligation mortgage advice and has expertise in the 5% mortgage guarantee scheme to help you further.

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How do I qualify for a 5% deposit mortgage?

The scheme offers broad support for those looking to use it.

To qualify you can be a first-time buyer or existing homeowner and buy a house with a value of £600,000 or less.

You will need at least a 5% deposit of the property value you wish to buy, and you will still need to pass the affordability calculation of the lender.

The standard affordability across most lenders is 4.5 times your annual salary. This does vary and some lenders offer different affordability calculations which is worth discussing with your broker if you’re concerned about achieving the desired mortgage.

For example, someone on an average UK income of £25,971 would be able to borrow £116,869 on the standard affordability calculation. With the 5% deposit of £5,843 the total value property available would be £122,712.

What kind of property can I buy with the 5% deposit mortgage guarantee scheme?

Unlike the new Help to Buy equity scheme, you won’t need to buy a new build property with the 5% deposit scheme.

The property you decide to buy will however need to meet the lender’s criteria. Each lender has different requirements for the types of property they will lend on.

When you have chosen your property, you should contact your mortgage broker and check it is eligible with your preferred lender under the 5% mortgage guarantee scheme. If it isn’t, your broker will be able to look at other lenders and check the property criteria they have.

As mentioned, the maximum value of a property under the scheme is £600,000. However, if you have found a property over this value, don’t despair as Boon Brokers may be able to identify a lender that meets your needs outside of the 5% mortgage scheme.

When the 5% Scheme Isn’t Available

There are a number of areas where the 5% mortgage deposit scheme is not available.

Second Homes If you’re looking to purchase a second home, you will not be able to use the 5% mortgage deposit scheme as it is designed to help those who are struggling to get onto the property ladder.

That doesn’t mean there aren’t products available if you’re looking to buy a second property or home. At Boon Brokers we have a number of options available if you’re looking to buy a second property.

Homeowners with Too Much Equity Because the scheme is designed to help those who are either struggling to get onto the property ladder or are struggling to stay on it, it won’t help existing homeowners with enough equity to fund a move themselves.

For existing homeowners looking to use the 5% deposit scheme you will need to demonstrate that you don’t have much equity in your current property. Sometimes you will also need to show that you have failed to remortgage or obtain a new mortgage with your current equity level as well.

Business or Commercial Purposes The scheme must be used for yourself or you and someone else. It is not open to incorporated companies or business entities and is designed solely for personal residential mortgages only.

Interest Only Mortgages In order to qualify for the scheme, you must be on a repayment mortgage when you complete on your property purchase. This is not suitable for those looking to Buy to Let or anyone who wants an offset mortgage.

When the 5% Scheme Might Not Be Available for Those Otherwise Eligible

The mortgage itself will have a number of requirements that prohibit those that might otherwise be able to use the scheme.

You will still need to pass the affordability checks of any lender offering access to the scheme and most lenders that offer the scheme prefer those with better credit ratings.

If you have a bad credit score or you’re on a low income, you might still find it difficult to access the scheme even if you have saved up the 5% required for the deposit.

This isn’t the end of the road however and if you’re struggling to get a mortgage for your personal circumstances, Boon Brokers would be happy to help. At Boon Brokers, we have access to many other lenders that can help those with affordability problems or bad credit.

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How long will the 5% deposit mortgage guarantee scheme be available?

Once approved, you can use the 5% mortgage deposit scheme for up to 7 years.

The scheme itself has a fixed end date of December 2022 and can be removed by the government at any time after this. 

Although the 2022 date is listed as the current end date, the scheme will likely be reviewed at some point and may continue beyond this date as other government schemes have done in the past. 

There is no guarantee that it will be continued beyond the 2022 cut-off date.

That means that if you’re looking to make use of the scheme it is best to apply for it now.

Even if the government withdraws the scheme next year, once approved you still have the same 7-year timeframe to use the scheme.

What Types of Deposit Can I Use on the 5% Mortgage Deposit Scheme?

You may be wondering whether your deposit qualifies for the scheme. To qualify with your deposit, you will need to show:

  • The source of the deposit. It can be gifted or from savings and all standard mortgage deposit rules will apply.
  • Equity. You can use existing equity in your property providing it is at least 5% of the intended property value. If you hold too much equity in your current property you won’t be able to use the 5% deposit scheme, but other mortgage options should be available to you.

What Are The Other Mortgage Deposit Options?

If you’re struggling to save for a deposit, the 5% deposit scheme can be an invaluable lifeline. 

Outside of the deposit scheme, there are lenders that still offer standard 5% deposit mortgages, so you don’t necessarily have to qualify for the scheme in order to buy a property with a 5% deposit.

The government also offers two other schemes that are designed to help you buy a property and may be more suitable than the 5% deposit scheme.

These other schemes can’t be used in conjunction with each other so if you opt to use the Help to Buy Equity Loan, you can’t use the 5% deposit scheme as well. 

To better understand the schemes available to you and which is best for your personal circumstances we have advisers at Boon Brokers who provide dedicated and bespoke free advice.

They will understand your property buying goals, discuss the options available to you and find you any relevant scheme that is applicable to your mortgage. 

What’s more, with Boon Brokers you will also have access to every UK lender, ensuring you get the very best mortgage deal for your situation and chosen scheme as well.


Despite the challenges first time buyers face with deposits, the government is now taking action to help you if you’re struggling to get a standard 10% deposit.

Of course, there will be limitations to any scheme and in a market that has so many products and options there is no one size fits all solution.

We understand that getting your first mortgage or remortgaging with low equity can seem like climbing an impossible mountain but the good news is that with Boon Brokers we smooth out the process entirely.

We will do our utmost to get you onto the property ladder, even if you think you might not qualify for a mortgage and have specialist lenders available even if you have bad credit or you’re struggling with affordability.

To discuss your property goals and understand the options available to you, call Boon Brokers today for your FREE no obligation mortgage advice.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.