How does a 95% mortgage work?
Taking out a 95% mortgage means your mortgage provider will lend you 95% of the cost of your new home. You’ll have to pay the remaining 5% up front as a deposit.
For example, let’s say you took out a 95% mortgage on a £250,000 house. This means you’d pay a £12,500 deposit (as £12,500 is 5% of £250,000). You’d then borrow £237,500 (the remaining 95%) from your mortgage provider. After that, you’ll make monthly payments to pay off your debt, plus interest.
You may see these mortgages called ‘95% LTV mortgages’. ‘LTV’ stands for ‘loan-to-value’, and means the mortgage covers 95% of the property’s price.