If you’re looking for new or remortgaging options, there’s good news for you. The mortgage guarantee scheme announced in the 2021 Budget aims to make low depository mortgages more freely available.
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.
If like some other first-time buyers, you might be struggling to save up enough for a deposit, or maybe you’re an existing homeowner but you don’t have much equity in your home, then this scheme might be able to help you.
What is the mortgage guarantee scheme?
The mortgage guarantee scheme, launched on 19 April 2021 and continues until 31 December 2022, was introduced to encourage lenders to offer mortgages to buyers with a deposit of as little as 5%.
To entice lenders, the government has effectively promised to cover any losses a lender suffers if the mortgage goes wrong.
Saving enough for a house deposit is often cited as the number one obstacle to first-time home ownership – an issue which has only got worse as the UK’s house prices have increased over the last year.
Nationwide Building Society reports that the year on year growth from March 2020 to March 2021 was 5.7%. And last year, in response to the coronavirus pandemic, many lenders stopped offering mortgages above 90% loan-to-value (LTV) — both contributing to the difficulty for many to get started on the property ladder.
The mortgage guarantee scheme will offer borrowers the prospect of a 95% LTV mortgage, leaving potential homeowners to cover just 5% of the loan in the form of a deposit.
How does the scheme work?
Typical deposits range from 10% to 20% and anything less than that is usually associated with additional risk. Because the government is offering to compensate lenders for part of their losses if a risky mortgage they take on falls behind on payments to the point of repossession, they are hoping the reduced risk will allow lenders to offer lower deposit mortgage options.
It’s important to note, other than additional mortgage options, there are no other benefits for a borrower. You will still need to maintain repayments on your mortgage, otherwise you could have your property repossessed.
This scheme is mainly geared toward mortgage providers because they’ll assume less risk with the government backing.
How to qualify
The qualification criteria for a low deposit mortgage offer may vary from lender to lender. There might be certain conditions and terms that your property purchase must meet in order to qualify for a 95% mortgage. Apart from that, you can be a first-time buyer or simply just wanting to upgrade to a newer or bigger place to benefit from the mortgage guarantee scheme.
Mortgage Help
One of the most important things you can do to streamline the mortgage and property purchasing process is to work with a mortgage adviser.
An adviser that specialises in the dental and medical profession is best placed to help you find lenders that know the industry and understand the often unique situations that come with working in the field. And if you need special accommodations like a lower deposit mortgage, we’ll be able to find the right lender for you. Don’t hesitate to reach out to us today.
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