Buy a house with 10% deposit or less

You don't need a massive deposit to get onto the property ladder with these mortgages.

Things have been extremely tough for first-time buyers of late. Indeed, according to figures from the Council of Mortgage Lenders the average deposit needed to get onto the housing market last year was larger than the average annual salary!

However, things may be starting to improve, as a succession of lenders have put together some interesting new deals for borrowers with small deposits.

Let's take a closer look.

Chelsea Building Society

Chelsea Building Society has launched mortgages over both two and five years for borrowers with a deposit of just 10%.

If you want to fix for two years, you can benefit from a rate of 4.39%, while fixing for the long-term with a five-year deal will secure you a rate of 5.29%. However, there are some significant fees to take into account with these mortgages – both deals will set you back £1,495!

Kensington

While the Chelsea deals are only available direct from the mutual's branches, the 90% loan-to-value mortgages from Kensington are only available through mortgage brokers.

The lender has a couple of products at this high loan-to-value specifically for first-time buyers, a two and three-year fixed rate mortgage, with rates of 5.99% and 6.39% respectively. The fees are also tremendously competitive, at just £699.

And there are even better deals on offer for non-first-time buyers with small deposits, with a two-year fixed rate at 5.79% and a three-year fixed rate at 6.19%. However, the fee is more expensive at £999.

Saffron Building Society

If even a 10% deposit is too much for you, then a new deal from Saffron Building Society may be of interest. The mutual has launched a 'rent to buy' mortgage, only available to first-time buyers who have rented for at least 12 months. And you'll only need a 5% deposit!

As such, the lender will take into account not only your credit record, but also your rental track record.

The mortgage on offer is a three-year fixed mortgage, with a rate of 6.49%, but a small fee of just £195. Again though, the distribution is pretty limited – you can only secure the mortgage direct, or via certain mortgage brokers.

Skipton Building Society

Another mutual offering deals at 95% loan-to-value, and again with a very small fee, is Skipton Building Society. Available on a two-year fixed rate mortgage, the rate is 5.99% and the fee is just £195.

The lender also has a couple of 90% loan-to-value deals at 5.39% and 5.99% respectively. The lower rate carries a fee of £995, while the latter deal boasts a fee of only £195.

Cambridge Building Society

Related blog post

• John Fitzsimons writes:

  Conveyancing must be brought into the 21st Century

  Guest blogger Mark Montgomery explains why technology offers an opportunity to cut down on sales falling through, as well as keeping property buyers up to date at all times.

  Read this post

A very local deal this one – Cambridge Building Society has teamed up with house builder Taylor Wimpey to offer the Take5 mortgage on a range of Taylor Wimpey developments across East Anglia.

Borrowers can choose between a two-year fix at 5.99%, a three-year fix at 6.39% and a five-year fix at 6.89%. All three deals carry a fee of £999 and are only available through brokers.

Kier Homes

A pretty niche offer from Kier Homes, a house buider, which has partnered with Step One Finance to offer a combination of a secured loan and mortgage. Step One Finance offers up to 15% of the purchase price as a secured loan, to help top up the mortgage to a total of 95%.

The secured loan is over a ten-year period, and comes with no early repayment charges.

Negative equity

One of the biggest dangers with buying via a high loan-to-value mortgage is that it exposes you to the potential of negative equity, where the mortgage you owe on the property is greater than the value of the property itself. While this isn't quite the apocalypse that some like to paint it as, it's still far from an ideal situation, as it makes it extremely difficult to move or remortgage.

As a result, it's really important that if you buy with a small deposit, it's a property that you are happy to live in for the long term, and on a deal that will still be affordable, even when rates do begin to rise.

Getting advice

As we have seen from these new mortgages, many of them are either only available through mortgage brokers, or from lenders that you may not even be aware of. As such, it's a good idea to have a chat with a broker if you only have a small deposit. They will have an idea of the sort of deals open to you, as well as which lenders will be keenest to work with you. You can pick the brains of our fee-free mortgage team over at our mortgage centre, whether via over the phone, by email or via instant messenger.

15 great low deposit mortgages

*Guarantor mortgage

At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.

This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article. 

Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.