Every month, you’re paying someone else’s mortgage through your rent while house prices keep climbing out of reach.
You’ve been saving, but it feels like the goalposts keep moving – by the time you’ve saved what you thought you needed, prices have gone up again.
A 90% mortgage allows borrowers to buy their new home with just 10% down.
With a 10% deposit mortgage, you could buy a £400,000 home with £40,000 saved. Let us explain everything you need to know about 10% deposit mortgages, including who can get one and how to make a successful application.
Understanding the Basics
When you’re buying a property with a 10% deposit mortgage, you’re providing one-tenth of the property’s value from your own savings, while the mortgage covers the rest.
For example, on a £400,000 property, you’d need £40,000 as your deposit, along with a mortgage of £360,000.
Mortgage lenders call this a 90% loan-to-value (LTV) mortgage.
Loan to value is important to lenders, as it represents their risk. Because of this, a 90% LTV mortgage would normally have better interest rates than 5% deposit options.
The option of a low deposit makes them increasingly popular with both first-time buyers and home movers.
Who Can Get a 10% Deposit Mortgage?
Most UK residents aged 18 or over can apply for a 10% deposit mortgage, provided they meet the lender’s criteria.
Employment status
For employed buyers, lenders ideally want to see at least 6 months in your current job. If you’re self-employed, you’ll usually need two years of accounts.
Certain professional occupations can qualify for higher income multiples from certain lenders. These can include; teachers, solicitors, dentists and doctors.
Credit history
You will also need a decent credit profile, lenders want to see you managing money responsibly, which means paying bills on time and keeping credit card balances reasonable.
Not borrowing money can have a negative effect here, as there’s not much information for lenders to see, making it more difficult for them to assess you.
Related reading: Can You Get a Mortgage with No Credit History?
Income
Your gross annual income needs to be sufficient to qualify for the 90% mortgage you need.
Multiply your income by 4-4.5 to see what this might be.
- £50,000pa = £200,000 to £225,000
- £60,000pa = £240,000 to £270,000
- £75,000pa = £300,000 to £337,500
Certain professional occupations can qualify for higher income multiples from certain lenders. These can include; teachers, solicitors, dentists and doctors.
Affordability
Having sufficient annual earnings is only part of the story. The lender will also look into how you spend your money each month, and how well you manage your finances.
Read more: What size mortgage could I afford to borrow?
Property
And then there’s the property you want to buy. The lender will assess its location, value, condition and construction type. There are certain types of property that are harder to mortgage than others, these include; thatched properties, flats above a shop, ex-council houses and concrete houses.
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Understanding What You Can Borrow
Most lenders will consider lending between 4 and 4.5 times your annual income with a 10% deposit.
So if you earn £50,000 a year, you might be able to borrow around £225,000. For couples or joint applications, lenders look at your combined income.
Your monthly outgoings play a big part too. Lenders check your regular bills, any loan payments, and other financial commitments. They’re making sure you can comfortably afford the mortgage payments alongside your other expenses.
Your Mortgage Costs
Monthly payments on a 10% deposit mortgage usually work out higher than if you had a bigger deposit, simply because you’re borrowing more money.
However, they’re typically lower than with a 5% deposit mortgage because lenders often offer better interest rates to those with bigger deposits.
Beyond your deposit, you’ll need to budget for several other costs.
A property survey can cost anywhere from £400 to £1,500 depending on the type you need. Legal fees typically run between £1,000 and £1,500. You’ll also need to budget for any mortgage arrangement fees, stamp duty and buildings insurance.
Building Your Deposit
For a £400,000 property, you’ll need £40,000 saved as your cash deposit.
While that’s a significant amount, many buyers find it more achievable than they first thought. Regular saving, even modest amounts, adds up surprisingly quickly. Many successful buyers start with a monthly saving plan, putting aside what they can afford as soon as they get paid.
Some buyers boost their savings using government schemes like the Lifetime ISA, which adds a 25% bonus to your savings up to £1,000 per year. Others combine their savings with help from family members.
There are many other costs that you need to budget for.
These will include mortgage and broker fees, legal fees, survey costs and stamp duty.
Read more: Guide to Deposits
Family Support and Gifted Deposits
Each year a huge number of home buyers benefit from the generosity of their family.
Many lenders welcome these ‘gifted deposits‘ from family members, usually parents or grandparents.
If someone’s helping you with your deposit, they’ll need to confirm in writing that it’s a gift, not a loan, and show where the money came from.
The lender will need to see this documentation and track the money moving between accounts.
Related reading: Getting a joint mortgage with parents
Making a Strong Application
Start preparing for your mortgage application at least three months before you plan to apply.
Your bank statements will be carefully checked, so keep your finances tidy during this period. Pay particular attention to your regular spending patterns.
If you’re currently renting, a solid payment history helps your application. It shows lenders you can manage similar regular payments successfully.
Try to avoid any major changes in your circumstances during the application process – staying in your current job, for example, will make things smoother.
Don’t apply for any new credit!
Related reading: How to get mortgage ready
Working with a Mortgage Broker
A mortgage broker can prove invaluable when applying for a new mortgage.
They know which lenders suit different circumstances and have access to deals you won’t find directly. This becomes especially helpful if your situation is slightly unusual – perhaps you’re self-employed, have bonus income, or previous credit issues.
A whole of market broker will have access to over 100 different lenders.
Brokers can recommend lenders who are more likely to accept your application, saving you time and protecting your credit score from multiple applications.
Read more: What does a mortgage broker do?
Taking Your Next Steps
First, work out exactly what you can comfortably afford.
Look beyond just the mortgage payments to all home-running costs. Consider council tax, utilities, maintenance, and insurance.
Then get your documentation ready – recent payslips or accounts, bank statements, proof of deposit, and ID documents.
Remember, once you’ve got your foot on the property ladder with a 90% mortgage, you’re not stuck with it forever.
After a couple of years, you might be able to remortgage to a better rate, especially if your property’s value has increased or you’ve paid off some of the mortgage.
Ready to explore your options with 10% deposit mortgages?
Speaking with an independent mortgage broker will help you understand what’s possible in your situation. They’ll look at your specific circumstances and guide you through the next steps.
Frequently Asked Questions
Lenders typically offer 4-4.5 times your annual income. For a £400,000 property with a 10% deposit, you’d need to earn around £80,000-£90,000 annually.
You also need to be aware that lenders conduct affordability checks, by looking at your bank statements they want to see how you spend your income.
Read more: Mortgage Affordability Explained
Yes, most lenders accept gifted deposits from immediate family members, but you’ll need a formal letter confirming it’s a gift, and not a loan.
Read more: What is a gifted deposit?
Yes, but you’ll usually need at least 2 years of accounts or tax returns to prove your income.
Yes, if you have 10% equity in your property, you can look at 90% LTV remortgages.
Existing debts will often reduce the amount you can borrow. Consider clearing some before applying.
Any money you are using as a deposit needs to be in a bank account, under your name, and needs to be traceable. If you have funds in lots of different places you may find it helpful to move them into one account prior to starting your mortgage journey.
Read more: A Guide to Mortgage Deposits
Yes. Lenders offer their interest rates based on loan to value (LTV) bands.
For example an LTV band could be 81%-90%.
Paying a deposit of 10%-19% will qualify. Any amount you pay over the minimum 10% will go towards lowering your initial mortgage.
All lenders will credit check people applying for a mortgage. This check will look at the last six years of your credit history and includes details on your borrowing, repayments, credit limits etc.
An Agreement in Principle (AIP) will use a soft credit search, which can’t be seen by other lenders.
A hard credit search is done when you formally apply for a mortgage. And most lenders re-check your credit history shortly before they hand over the mortgage money to your solicitor.
For this reason it is vital that you do not apply for any new credit between applying for a mortgage and actually moving in.
Read more: Do mortgage lenders do a final credit check before completion?
