No Deposit Mortgage vs Low Deposit Mortgage: Which Route Is Better for You?
Should You Buy With No Deposit or Wait Until You Have 5%?
For many buyers, the biggest barrier to owning a home is not necessarily the monthly mortgage payment. It is building the deposit while continuing to pay rent and other living costs.
That can create an important decision: should you consider a no deposit mortgage now, or wait until you have saved a 5% deposit?
There is no single answer that works for everyone.
A no deposit mortgage can allow an eligible buyer to purchase without contributing a traditional cash deposit towards the property price. A 5% deposit mortgage, by comparison, normally means borrowing 95% of the property’s value and contributing the remaining 5% yourself.
The difference may look small on paper, but it can affect the amount you borrow, the products available to you, your monthly costs and the level of equity you have from day one.
If your main question is whether you may qualify for a 100% mortgage and what routes are available, see our No Deposit Mortgage service page.
100% Mortgage vs 95% Mortgage: What Is the Difference?
The easiest way to compare the two is through loan-to-value, usually called LTV.
With a 100% mortgage, the mortgage borrowing can cover the full purchase price, so the LTV is 100%.
With a 5% deposit, you contribute 5% yourself and borrow the other 95%, creating a 95% LTV mortgage.
For example, on a £250,000 property:
|
No Deposit |
5% Deposit |
|
|---|---|---|
|
Property price |
£250,000 |
£250,000 |
|
Cash deposit |
£0 |
£12,500 |
|
Mortgage required |
£250,000 |
£237,500 |
|
LTV |
100% |
95% |
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Does a 5% Deposit Give You More Mortgage Options?
Generally, having a deposit can widen the range of mortgage products that may be available.
This is because lending 95% of a property’s value represents less exposure for a lender than lending 100%.
MoneyHelper also notes that a larger deposit can provide access to a wider range of mortgage deals and potentially lower rates.
That does not mean a 95% mortgage will automatically be cheaper or suitable for every borrower. Your income, expenditure, credit history, property, employment circumstances and lender criteria still matter.
But if you already have 5% available, it is usually worth comparing the 95% LTV market before choosing a specialist no-deposit route.
Find the Right Mortgage Route for Your Situation
When Could a No Deposit Mortgage Make Sense?
Waiting to save 5% is not automatically the best decision.
For someone paying substantial rent every month, saving another £10,000 or £15,000 could take a considerable amount of time. Meanwhile, their circumstances, property prices or mortgage availability could change.
Some current 100% mortgage routes are specifically designed around circumstances such as a strong history of rental payments or financial support from family or friends.
For example, Skipton currently offers its Track Record mortgage to eligible applicants with little or no deposit and assesses rental payment history as part of its criteria. Barclays’ Family Springboard Mortgage currently allows eligible buyers to borrow the full purchase price where a helper provides savings as security.
The existence of these products does not mean a no-deposit mortgage is automatically suitable. Product criteria can be restrictive and availability can change.
The important question is not simply “Can I get a no deposit mortgage?”
It is:
“Does buying without a deposit make financial sense for my circumstances compared with waiting and putting down 5%?”
When Could Saving a 5% Deposit Be the Stronger Option?
If saving 5% is realistic within a reasonable timeframe, waiting may improve your position.
A deposit reduces the amount you need to borrow and gives you some equity in the property from the beginning.
It may also provide access to a wider mortgage market.
This can be particularly important if the affordability calculation is already tight. Borrowing £237,500 rather than £250,000, for example, may affect both the monthly payment and the overall amount of interest paid over the mortgage term.
There is also the question of resilience.
If property prices fall after purchasing at 100% LTV, there is a greater risk of owing more than the property is worth. This is known as negative equity. Starting with a deposit provides an initial equity buffer, although it cannot remove the risk entirely. MoneyHelper specifically identifies negative equity as a consideration with high-LTV and no-deposit borrowing.
The Real Cost Is More Than the Deposit
It is easy to compare the two routes only by asking:
“Do I have £12,500 available or not?”
That is not enough.
A useful comparison should consider the mortgage rate available, monthly repayment, amount borrowed, total interest over the chosen term, product fees, purchasing costs and the savings you would have left after completion.
Using every pound of available savings as a deposit may also leave a buyer with very little emergency cash after moving into the property.
Conversely, choosing a no-deposit mortgage purely to keep savings untouched can mean taking on more borrowing than necessary.
The right balance depends on the whole financial position rather than one number.
Five Questions to Ask Before Choosing
Before deciding between a 100% and 95% mortgage, consider:
- How long would it realistically take me to save a 5% deposit?
- What mortgage options could I access today with no deposit versus 5%?
- How different would the monthly repayments and overall borrowing be?
- Would I still have enough savings for buying costs and emergencies after paying a deposit?
- How comfortable am I with the additional risk of starting at 100% LTV?
The answers can be very different for two buyers purchasing properties at the same price.
Should I Get a No-Deposit Mortgage?
A no-deposit mortgage can be useful when the lack of a deposit is the main obstacle between an otherwise suitable borrower and homeownership.
But being eligible for one does not automatically mean it is the best mortgage to choose.
If you can build a 5% deposit relatively quickly, comparing the wider 95% LTV market may reveal options with lower borrowing, greater product choice or a more comfortable financial position.
If reaching 5% could take years while you continue paying rent, a suitable 100% mortgage route may deserve consideration now.
This is why the decision should be made by comparing both routes using your actual circumstances, rather than deciding that one type of mortgage is always better.
Compare Your No Deposit and Low Deposit Options
PBSBrokers can review your income, affordability, credit profile, available savings and property plans to help you understand which mortgage routes may be available.
If you currently have no deposit, explore our No Deposit Mortgage options.
If you already have a small deposit or are close to reaching 5%, see our Low Deposit Mortgage options.
The aim is not simply to find the mortgage requiring the least money upfront. It is to identify a mortgage route that is suitable for your circumstances and sustainable over the longer term.
Book a free initial consultation with PBSBrokers to compare your options.
No Deposit and Low Deposit Mortgage FAQ
Generally, yes. A 100% LTV mortgage finances the full purchase price of the property, meaning the buyer does not provide a traditional deposit towards that price. Other purchasing costs can still apply.
Not automatically. A 5% deposit reduces the amount borrowed and may provide access to more mortgage options, but waiting to save it may not suit every buyer. The two routes should be compared using your affordability and circumstances.
Some 100% mortgage options are available to eligible first-time buyers, but criteria can be specific and product availability changes.
Yes. If the lender provides 95% of the property's value and you contribute the remaining 5%, the mortgage is normally described as 95% LTV.
Disclaimer
Eligibility, affordability criteria and product availability may change over time. For personalised guidance, please contact PBSBrokers before making any financial decisions.
Written and reviewed by financial specialists
The identity, expertise, and review process behind this content are transparent and traceable.
Ali Masoumi
Content Writer & Digital Marketer
Amir Shojaee
Director and Founder of PBSBrokers
This article provides general information and should not be considered personalised financial advice. Eligibility, rates, and outcomes depend on individual circumstances.
