How are these mortgages now available?
The UK Government will be introducing a new scheme to incentivise lenders to reintroduce 95% mortgage deals from April 2021. These types of mortgages have been available previously but the number of 95% mortgage products has largely decreased during the pandemic.
The new mortgage guarantee scheme will see the UK Government act as a safety net for lenders. In the worst case scenario, if or where the property is repossessed and sold at a loss, the Government will take on some of the losses incurred by the lender. In return, lenders will have greater incentive to offer 95% mortgage products to people looking to buy a new home, as they’ll carry less risk.
What do I need to know?
There are a few things you should know about the new scheme:
- It will launch from April 2021
- You can purchase properties up to £600,000 with a 5% deposit
- It’s open to all homebuyers (not just first time buyers)
- Normal mortgage affordability checks will still be in place (a mortgage adviser will help with this)
Can I now get a mortgage?
This all depends on your individual circumstances and affordability, which can be assessed by an expert mortgage adviser. However, as you now only require a 5% deposit for a 95% LTV mortgage, many prospective homebuyers could find they have enough to buy their first property.
For example, let’s say you were aiming to buy a home for £200,000 through a 90% LTV mortgage. Your deposit would have been £20,000.
With a 95% LTV mortgage, your deposit could be as low as £10,000. You could even use savings from a Lifetime ISA to put towards your deposit.
These mortgages could also mean that if you had a larger deposit saved, you might now be able to increase your budget when looking for your new home. Or it could mean that you could take on a project property and use the rest you’ve saved to transform it into your dream home!
Would you like to find out whether a 95% mortgage product is right for you? Or maybe just fancy a chat to discuss your options? We’re always here to help. Feel free to get in touch and contact us today.