What is a 95% LTV mortgage?
A 95% LTV mortgage is one where you borrow 95% of what the property costs and cover the last 5% yourself as a deposit. LTV is short for loan-to-value, the size of the loan measured against the value of the home.
Take a £200,000 property. You would put down a £10,000 deposit and borrow the remaining £190,000. A bigger loan against the value means the lender is exposed to more risk if prices dip, and that is the reason rates at 95% LTV usually run higher than at 90% or 85%.
Who offers 95% LTV mortgages?
Most of the big high street lenders write 95% LTV mortgages now, Barclays, Halifax, HSBC and Nationwide among them. A number of building societies and specialist lenders lend here too, and some take a more flexible view on who they will accept.
What is on offer can shift quickly with the market. A mortgage broker can tell you who is actively lending at 95% LTV this week and which product gives you the best value for your circumstances. You can also compare mortgage deals side by side to see how the rates stack up.
What are the interest rates like?
Rates on a 95% LTV mortgage are higher than on the lower LTV bands, because the lender carries more risk when your deposit is small. On the same property the gap is often 0.5% to 1% above a 90% LTV deal.
They have come down and grown more competitive over the past few years, though. At this level most buyers fix for two or five years, which locks your monthly payment in place while you build up equity (the share of the home you own outright).
When you have built enough equity to reach 90% LTV, whether through your repayments or a rise in house prices, you can remortgage onto a cheaper rate.
Tips for getting approved
A lender looks hard at your finances at 95% LTV. Check that your credit report is tidy, clear down what debt you can, and hold off on big purchases or a job change in the months before you apply. If pulling a deposit together still feels out of reach, shared ownership is worth a look as another way in.
Keep a clear trail for your deposit as well. A lender wants to see that the money has built up over time, and where any of it is a gift, that the person giving it has signed a declaration to say so.