If you’ve built up significant savings or gained equity from a previous property, you might be able to put down 75% of a home’s purchase price. In other words, you’d only require a 25% mortgage on the remaining balance. This can be an excellent way to secure lower interest rates and reduce your overall monthly payments.
Below, The Mortgage Pod explains the mechanics of a 75% deposit mortgage (25% mortgage), who might benefit, and how to strengthen your application. Let’s explore!
Understanding 75% Deposit Mortgages
A 75% deposit mortgage means you fund 75% of the property’s value yourself, so the lender only needs to provide the remaining 25%. For example, if the property costs £300,000, your deposit would be £225,000, and the loan amount would be £75,000.
Because you’re borrowing at a 25% Loan-to-Value (LTV), the mortgage lender views your application as lower risk compared to those borrowing a higher percentage. This often unlocks favourable interest rates, a potentially smoother approval process, and more manageable monthly costs.
Understanding Mortgage Deposits
When buying a property, the deposit is the portion of the price you cover from your own funds—separate from what you borrow. A bigger deposit not only reduces the total you need to repay, but it also demonstrates your financial strength to lenders, potentially earning you more advantageous loan terms.
Minimum Deposit Requirements
In the UK, most residential mortgages begin at a 5% deposit. Opting for a 75% deposit can offer:
- Significantly lower interest rates
- Reduced risk to the lender, so you may have an easier time qualifying
- Smaller monthly repayments, thanks to borrowing a smaller sum
For Example:
- 75% Deposit on a £400,000 Property = £300,000
- 10% Deposit = £40,000
- 5% Deposit = £20,000
Why Do I Need a Mortgage Deposit?
Deposits serve two vital roles:
- They shrink your overall borrowing – By paying more upfront, you cut down on the mortgage amount and subsequent interest.
- They provide lender confidence – A larger deposit underscores your financial reliability, lowering the lender’s risk.
Factors Affecting Deposit Size
How much deposit you can, or decide to, provide varies:
- Type of Property – Certain homes (for instance, a new-build flat) might require a bigger deposit.
- Financial Background – A strong credit record, stable income, and minimal debts all help.
- Lender Preferences – Each provider has unique criteria around deposits and mortgage eligibility.
How Do 75% Deposit Mortgages Work?
Once you’ve decided on a 75% deposit mortgage, the structure is similar to any other home loan: you repay the borrowed amount (25% of the property’s value), plus interest, over a set term (commonly between 25 and 35 years). But with a 25% mortgage (75% deposit), you’ll often see:
- More competitive interest rates than higher LTV deals.
- Potentially simpler affordability checks, as you’re borrowing significantly less.
Example: On a property priced at £350,000, paying £262,500 (75%) upfront leaves you a £87,500 mortgage to pay off. Your monthly bills are likely to be more manageable than if you needed 90% or 95% finance.
Eligibility Criteria for a 75% Deposit Mortgage
Even though your deposit is substantial, lenders still apply standard checks. They typically examine:
- Credit History – On-time payments, minimal debt balances, and a healthy credit score.
- Income & Employment – Steady earnings (or strong accounts if self-employed).
- Debt-to-Income Ratio – Lower levels of debt can increase your maximum mortgage amount.
- Property Assessment – The lender will confirm that the home meets their valuation and condition requirements.
Application Process for a 75% Deposit Mortgage
Though each lender’s approach may differ, the usual steps look like this:
- Check Your Credit Rating – Address any errors, lower existing debts, and keep all bills current.
- Compile Documents – Prepare bank statements, payslips or self-employed accounts, proof of ID, and utility bills.
- Compare Lenders – Each one has varied interest rates, product fees, and criteria.
- Submit Your Application – Provide the necessary information for affordability assessments.
- Formal Offer – If accepted, the lender issues a written offer stating the rate, fees, and term of the mortgage.
By working with a mortgage broker—such as The Mortgage Pod—you can streamline this process, get bespoke guidance, and increase the chance of finding a suitable deal more quickly.
Pros of a 75% Deposit Mortgage
- Potentially Lower Interest Costs – A smaller loan amount often earns you more favourable rates.
- Reduced Monthly Payments – Borrowing less should lower your monthly bills.
- Greater Choice of Products – Lenders tend to offer a broad range of deals to those with low LTV requirements.
- Enhanced Protection Against Negative Equity – If house prices drop, having 75% equity offers a larger buffer.
Cons of a 75% Deposit Mortgage
- Significant Upfront Cost – Amassing 75% can be challenging, particularly in expensive areas.
- Less Liquidity – Using a large portion of your savings for the deposit leaves you with fewer funds for emergencies or investment opportunities.
- Property Market Risks – Though more secure than higher LTVs, a substantial market downturn can still cut into your equity.
- Eligibility Checks – You’ll still need to pass standard credit and affordability tests, even with a big deposit.
Who Can Benefit from a 75% Deposit Mortgage?
- Homeowners Moving Home – If you’re selling a property at a profit, you could have enough equity to cover 75% of your next purchase.
- First-Time Buyers with Large Savings – Some first-time buyers might have been saving for many years or received a gifted deposit.
- Buy-to-Let Investors – A bigger deposit can boost rental returns and make mortgage approvals simpler, though buy-to-let rules differ from standard residential.
Are There Any Government Schemes to Assist?
Most government programmes centre on buyers with smaller deposits. However, if you’re a first-time buyer, you may benefit from Stamp Duty relief—check the latest thresholds and eligibility guidelines to see if you qualify.
Additional Costs to Consider
When purchasing a home, keep in mind potential extra expenses beyond your deposit:
- Legal/Conveyancing Fees – Covering property searches, contracts, and other formalities.
- Stamp Duty Land Tax – Depending on the home’s price and your buyer status.
- Valuation & Surveys – A standard lender valuation is often required, but more thorough surveys come at an extra cost.
- Moving & Set-Up – Don’t forget removal services, any immediate improvements, and new furniture.
How to Improve Your Chances of Getting a 75% Deposit Mortgage
- Boost Your Credit Score – Rectify inaccuracies, make payments on schedule, and keep debt levels modest.
- Maintain Steady Income – Lenders love consistency, whether you’re employed or self-employed.
- Demonstrate Responsible Borrowing – Minimising outstanding commitments shows you can comfortably take on a mortgage.
- Budget for Other Fees – Being prepared for costs beyond the deposit will reassure lenders of your financial stability.
Exploring Lender Options
With a 75% deposit, you should find numerous lenders vying for your business. Important considerations:
- Interest & Fees – A low promotional rate can be undercut by high arrangement fees, so compare total costs.
- Flexibility – Some providers might allow overpayments or offer payment holidays.
- Service Quality – Check reviews or seek personal recommendations to gauge customer support experiences.
Additional Considerations
- Deposit on Exchange – Typically 5–10% of the purchase price is paid at exchange of contracts, so ensure part of your deposit is readily available.
- Market Variability – A 75% deposit offers security, but shifts in house prices can still affect your equity position.
- Rent vs. Buy – If you haven’t quite hit the 75% target, weigh up renting a bit longer or exploring different mortgage LTV tiers.
- Arrangement Fees – Some mortgage products carry upfront or booking fees, which add to your initial costs.
Comparing 75% Deposit Mortgages
When assessing offers, look at:
- Fixed vs. Variable Rates – Fixed rates supply stable monthly bills, while variables can shift if the Bank of England changes base rates.
- Product & Exit Fees – Early repayment charges or steep arrangement fees can offset a promising headline rate.
- Mortgage Term – Spreading your repayments over more years cuts monthly outgoings but can increase total interest.
Saving for a Mortgage Deposit
If you’ve not yet reached 75%, consider:
- Setting Realistic Goals – Calculate how much to save each month and stick to a plan.
- Reviewing Budgets – Streamlining expenses leaves more for your deposit fund.
- High-Yield Accounts or ISAs – Explore savings vehicles that offer advantageous rates or bonuses.
- Increasing Income – Freelance gigs, extra shifts, or side businesses can speed up your deposit timeline.
Mortgage Deposit and Monthly Payments
Your deposit size has a direct effect on your monthly mortgage responsibilities:
- Bigger Deposit = Reduced Loan – Leading to generally lower interest rates and cheaper monthly bills.
- Smaller Deposit = Larger Loan – Higher interest rates and heavier monthly payments.
- Interest Rate Shifts – Even small differences can significantly influence what you owe over time.
How Your Deposit Affects Your Monthly Outgoings
- Consult Online Calculators – Experiment with different deposit figures to see immediate impacts on monthly bills.
- Speak to a Broker – A professional can outline how adding extra savings (e.g., from 70% to 75% deposit) might slash your total interest.
- Plan for the Long Haul – Over 25–30 years, a seemingly small reduction in interest can produce considerable overall savings.
Alternatives to Saving a Large Deposit
If a 75% deposit seems out of reach:
- Lower Deposit Mortgages – 5–20% deposit offerings are available, though you’ll pay more each month.
- Shared Ownership – You buy part of the property while paying rent on the remainder.
- Family Support – Guarantor or gifted deposit mortgages may reduce how much you need upfront.
Options if You Cannot Manage a 75% Deposit
- Longer Mortgage Terms – Spreading payments over 30–35 years lowers monthly costs but increases the total interest paid.
- Guarantor Mortgages – A family member can secure part of your mortgage if you can’t manage the entire deposit.
- Broker Expertise – Mortgage advisers sometimes discover niche deals or special schemes you may be unaware of.
Conclusion: Is a 75% Deposit Mortgage Right for You?
A 75% deposit mortgage can lead to lower interest rates, smaller monthly commitments, and greater security if house prices shift. On the flip side, assembling three-quarters of a property’s value is no small task, and you’ll face standard credit checks regardless.
Still deliberating? The Mortgage Pod is here to help you navigate your financing choices. We’ll scour the market, consider your finances, and determine whether a 25% mortgage suits your home-buying strategy. Get in touch for tailored support on your journey to securing your dream property.
Frequently Asked Questions
Can I get a 75% deposit mortgage if I’m self-employed?
Yes. While a large deposit aids your case, you’ll still need solid evidence of sustainable income (often two years of accounts) and a respectable credit profile.
Are 75% deposit mortgages just for existing homeowners?
No. First-time buyers who’ve saved consistently—or received a substantial gift or inheritance—can also consider such mortgages, if they meet the lender’s remaining criteria.
What if house prices go down?
A 75% deposit offers a strong equity buffer, so a downturn is less likely to push you into negative equity. Nonetheless, any sharp price falls could still reduce your total equity.
Can I move to an even lower LTV mortgage later on?
Absolutely. If you make overpayments or your property’s value climbs, your LTV decreases further, and you could remortgage for even better rates.
