The deposit is the wall most first-time buyers hit. Not the monthly payment, which they can often manage comfortably, but the lump sum needed to start.
There is more available than people realise. There is also a lot of noise. Here is what actually exists and what each option really does.
Five per cent deposit mortgages
The standard route, and more available than its reputation suggests. Plenty of lenders offer 95% loan-to-value mortgages, some through the government's Mortgage Guarantee Scheme and some entirely on their own terms.
The scheme supports lending at 91% to 95% loan-to-value on a main residence up to £600,000, with the government guaranteeing part of the lender's risk. From your side it looks like an ordinary mortgage. You will not particularly notice the scheme exists.
The catch: the less deposit you put down, the higher the rate. Rates step up in bands as your loan-to-value rises, and 95% is one of the more expensive bands. You are paying for the lender's extra risk.
Very low deposit products
Some lenders go beyond 95%, occasionally as far as a 2% deposit with a minimum cash amount attached.
These can genuinely be the difference between buying and not buying, if your income comfortably supports the payments but the savings are not there yet.
The catch: they are often priced above the equivalent 95% deal, sometimes noticeably, and they can come with conditions on property type or a longer fixed period. Worth checking, in particular, whether your deposit actually puts you into the 95% band anyway. On a £200,000 purchase, a £10,000 deposit is 5%, so a standard 95% mortgage may well be cheaper than a headline 98% product.
Always compare the two side by side. The eye-catching one is not automatically the cheaper one.
Shared ownership
You buy a share of a property, typically between 10% and 75%, and pay rent on the rest. You only need a deposit on the share you are buying, which brings the entry cost down substantially.
The catch: you pay rent as well as a mortgage, usually a service charge too, and selling can be more involved than an ordinary sale. Increasing your share later, known as staircasing, has its own costs. It suits some people well and frustrates others, and it is worth going in with both eyes open.
Lifetime ISAs
Not a mortgage, but it belongs in this list because it is the most reliable free money available to a first-time buyer.
If you are between 18 and 39 you can pay in up to £4,000 a year and the government adds 25%, so up to £1,000 a year on top. Over a few years that is a meaningful part of a deposit.
The catch: there are rules on the property price and on when you can withdraw, and taking money out for anything other than a first home or retirement carries a penalty that can leave you with less than you put in. Worth understanding properly before you open one.
Help from family
Gifted deposits are common and straightforward, though the lender will want to know where the money came from and usually a letter confirming it is a gift and not a loan.
There are also products where a family member's savings or property support your application without them handing the money over. They are more niche, and the family member is taking on a real commitment, so it needs a proper conversation rather than an assumption.
How to think about it
Rather than asking which is best, work through these in order:
- What can you comfortably afford monthly, before thinking about deposit at all
- What deposit will you realistically have, and when
- Which routes does that combination open
- What does each actually cost over the fixed period, including fees
That order matters. Starting from the product rather than your own numbers is how people end up with something that technically works but is more expensive than it needed to be.
The plain version
- 95% mortgages are widely available, at a higher rate than bigger deposits get
- Very low deposit products exist but are not automatically cheaper than 95%
- Shared ownership lowers the entry cost, at the cost of rent and complexity
- A Lifetime ISA is the closest thing to free money, with rules attached
- Compare total cost, not headline rate
Which of these suits you depends entirely on your income, your savings, your timescale and the sort of property you are after.
If you are trying to work out what is realistic, get in touch. A half-hour conversation now will save you a lot of guessing.
Mortgage Guarantee Scheme terms and Lifetime ISA rules from gov.uk.