Don’t fall for the mortgage deposit myth!
First-time buyers often ask the question: How much do I need for a deposit for my mortgage? But a survey has found many don’t ask because they fall for the mortgage deposit myth.
The research – published in the past few weeks – has shown that almost40% of first-time buyers believe they need a deposit of 10% or more!
And the same study shows that 4 in 5 first-time buyers say they were unaware that they might qualify for a 95% loan-to-value (LTV) mortgage. That means needing a deposit of just 5%.
The first-time buyers who took part also said they were stuck in rental properties because they were unaware of ‘track record’ mortgages. These home loans help you secure a mortgage by proving your track record of rental payments. Many first-time buyers believe that they’re in a catch-22 situation as they need a mortgage record to secure a mortgage!
More than 70% of those who were polled also said they didn’t know about the full range of family-assisted mortgage options.
At The Mortgage Dog, we are specialists in first-time buyer advice. That’s why we’ve started ourseries of blogs for first-time buyers!
So, with this research in mind, let’s answer those questions and bust some myths!
The mortgage deposit myth
Thecommon myth– especially among first-time buyers – is that you need at least 10% of the property price saved before any lender will consider giving you a mortgage.
But it is understandable why people don’t realise that is a myth. In the past, 10% deposits were common, but that’s no longer the case for everyone.
In today’s mortgage market, some lenders will offer 95% LTV mortgages, which means buyers may only need a 5% deposit to purchase a property. For many first-time buyers, this can make home ownership feel much more realistic and achievable.
Asking a mortgage broker, like The Mortgage Dog, is always a good first step. That’s because brokers often have access to specialist lenders who aren’t always on the high street or available through comparison sites! Specialists lenders are more likely to offer 95% LTV mortgages.
What does 95% LTV mean?
Mortgages can sometimes attract a bit of jargon. LTV (or loan-to-value) is a phrase often used. But what does it mean? Well,we’ve looked at it in depth in a previous blog. But put simply, it means the mortgage lender will lend you 95% of the value of the property. You need to find the rest of the amount, which is called a deposit.
For example:
Property price: £200,000
5% deposit: £10,000
Mortgage amount: £190,000
These mortgages offer buyers the chance to buy without needing to reach a large amount of savings before getting onto the property ladder.
No deposit mortgages
In some cases, homebuyers can access 100% mortgages, meaning you don’t need to pay a deposit. There are specialist lenders willing to give you the full amount of the property. But there are, of course, criteria for you to meet. For example, one lender requires a steady income of more than £24,000 and a clean credit history.
Another lender offers first-time a mortgage where parents pay a 10% deposit – but its paid back with interest.
Getting you on to the property ladder
For buyers who are currently renting while trying to save, reaching a 10% deposit can often feel like a moving target. Rising living costs, increasing rents and daily expenses can make it difficult to put large amounts aside each month.
That’s why many people are surprised to learn that some lenders are happy to consider applications with smaller deposits.
A 5% deposit mortgage may be suitable for:
First-time buyers.
Buyers with stable income and affordability.
People receiving gifted deposits from family.
Buyers struggling to save while renting.
Of course, having a larger deposit still has its advantages. For example, you will own a bigger share of the house. And buyers with bigger deposits may sometimes access lower interest rates or a wider range of products. But that does not mean buyers with smaller deposits need to forget the dream of owning their first home.
Track record mortgages
The survey of first-time buyers also highlighted that many people who are renting don’t realise that their rental record can help them buy a home.
Again, some specialist lenders might be able to offer atrackrecordmortgage.
These products are designed to help renters transition into homeownership by demonstrating that they can comfortably manage monthly payments, similar to a mortgage. Lenders review bank statements and payment histories over a set period, often 12 months, to assess reliability and affordability.
One of the biggest advantages of a track record mortgage is accessibility. Buyers with smaller deposits may still qualify if they can show a strong history of paying rent on time. It also rewards good financial habits, giving responsible renters a realistic pathway onto the property ladder.
Borrowers should still compare interest rates, fees and eligibility requirements carefully. As with any mortgage, affordability checks remain important.
Family-assisted mortgages
If you don’t have the savings for a deposit, then family-assisted mortgages are a possibility.
Family-assisted mortgages let relatives help loved ones buy a home by supporting the loan without being the primary borrower. Common options include:
Guarantor mortgages, where a family member guarantees repayments or pledges property as security
Gifted deposits, where relatives provide non-repayable funds to boost the buyer’s deposit;
And joint mortgages, where family members join the mortgage and share ownership and responsibility.
Each type can help offer faster purchase timelines, lower LTV ratios and access to better rates.
But there are risks! These include financial exposure for the helper – guarantors or joint owners become liable if the borrower defaults – and potential tax or inheritance implications for significant gifts or transfers.
Lenders may require evidence that gifted deposits aren’t repayable, and guarantors usually need good credit and sufficient income.
Remember, families can fall out! So, while you might be asking a family member who you always get on with, it’s sensible to arrange clear, written agreements and open communication to prevent disputes
Ask us your mortgage deposit questions
As we’ve seen, first-time buyers can misunderstand what is involved in mortgages and buying a home. It’s always best to get an expert to advise you so you don’t commit to payments or a mortgage that turns out to be unaffordable!
Contact us today for a chat, and remember it’s free and doesn’t mean we’ll sign you up! And if you want to know who you might be talking to, check out ourAbout Uspage to ‘meet’ our knowledgeable and friendly team.
Remember that your house is at risk if you fail to keep up with your mortgage repayments or any other loan secured on your property
