Can You Still Get a 5% Mortgage?

There’s no denying that many people in Britain find it extremely hard to get a mortgage these days, even if they have perfect credit scores and minimal outgoings each month. Why? The answer is simple: they can’t afford to come up with the deposit needed for a new home.

That’s because the value of many properties has gone up substantially in recent years, while salaries largely remain the same. With that in mind, it can take first-time buyers and existing homeowners many years to claw together the money needed for a deposit.

95% mortgage guarantee scheme

Until 2017, potential first-time homebuyers could take advantage of the Help to Buy mortgage guarantee scheme. In a nutshell, homebuyers that met the criteria could apply for a mortgage where the government acted as guarantors.

With a 95% LTV (loan-to-value), homeowners only needed to come up with a 5% cash deposit instead of 10% or more, making homebuying more accessible to people.

is there an alternative 5% mortgage?

The good news is that the UK government announced a new mortgage guarantee scheme, again where homebuyers only need to come up with a 5% mortgage deposit. The announcement got made in the Spring 2021 budget.

Unlike the previous scheme, the new scheme is available to all credit-worthy applicants, not just first-time buyers. It covers properties up to a value of £600,000, and the government acts as a guarantor for 95% of the money lent to homebuyers for their property purchases.

How does the 95% mortgage scheme work?

The scheme works in much the same way as most other mortgages. Lenders will conduct affordability and creditworthiness checks to determine if you’re eligible for the scheme.

If you cannot keep up with your mortgage payments, the government will guarantee to cover those fees to your lender and all amounts up to 95% of the money lent to you.

 

Whether you’re looking for a first time buyer mortgage, you’re an existing home buyer, contact your mortgage broker Manchester today to discuss your requirements and determine your suitability for a 5% deposit mortgage.

 

what do you need for a mortgage

which lenders are participating?

Many of the UK’s major mortgage lenders, such as Barclays, HSBC, and Santander, participate in the 95% mortgage scheme. Likely, other lenders will also come on board at a later stage.

For homebuyers, that means they have a broad choice of lenders that can potentially arrange a 95% mortgage for their next property purchase.

Am I eligible?

You could be eligible for a 95% mortgage if you’ve got a good credit history, you pass affordability checks, and, of course, you can come up with a 5% cash deposit for your future property purchase.

If you have a chequered financial past, please bear in mind that you may struggle to get a 95% mortgage from some mainstream lenders, despite the government’s guarantee.

Is a 5% mortgage right for me?

Property prices have generally risen in the past ten years.

Because of that fact, some potential buyers struggle to come up with a 10% or greater deposit. If that sounds like you, and you can come up with a 5% deposit, the scheme could be the best choice for your needs.