People that have had a hard time saving up for a house deposit have more options than they might think. There are mortgages available with as little as a 5% deposit. Of course, the more you can put down, the better rate you’ll qualify for, but there are still providers out there that will allow you to get a mortgage of up to 95% of the property price. Learn more about low deposit mortgages.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
95% mortgages
This kind of mortgage allows you to borrow up to 95% of the purchase price of a property. That means you only need to put down a 5% deposit to get on the property ladder.
A smaller deposit does mean you won’t have endless options, but there are still competitive rates available for a low deposit mortgage. The bigger deposit, the more choices you’ll have, obviously, so the more you can put forward, the better. Lenders will also take into account your income, expenses, and credit score, so you’ll have to be fully financially prepared.
When the coronavirus pandemic hit, many higher loan-to-value (LTV) products were discontinued to help lenders mitigate risk. But the economy is recovering and banks and building societies are now offering 90% and 95% LTV deals again.
Types of mortgages available
Like any other mortgage, you can go for a fixed rate or a variable rate.
Fixed rate mortgages usually last between two and five years and give you a fixed monthly payment for the period of time. At the end of your initial term, you can either look for another deal and remortgage, or you can be transferred to your lender’s standard variable rate (SVR). You’re usually better off switching as SVRs are often more expensive.
Variable rate mortgages are usually more expensive and depend on the rate the lender decides. Alternatively, tracker mortgages are linked to the Bank of England base rate so there’s no guarantee what your rate will be. If you can handle fluctuating payments over the course of the loan, you could luck out sometimes with a variable rate mortgage.
Government 95% mortgage guarantee scheme
The recently announced government-backed 95% mortgage scheme means these loans are even more appealing than ever. All home buyers purchasing a home worth up to £600,000 have options available for a mortgage at many major lenders from April 2021 to December 2022.
It works similarly to the now defunct Help to Buy mortgage guarantee scheme, which was discontinued in 2017. It’s an incentive for the banks to offer higher LTV loans as the government is offering to guarantee any outstanding loan payments borrowers are unable to pay. With potential risks covered, more lenders should provide mortgage options for borrowers with low deposits.
Mortgage help
Getting a mortgage is one of the biggest financial commitments you’ll make in your life. If you need a little help and wish to take advantage of a 95% mortgage offering, we’re happy to help guide you through the whole application process. Get in touch to get started with your home buying journey now.
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