The word is out – 5% deposit mortgages and how they work.
The Chancellor Rishi Sunak spoke about the details of the scheme. It is designed to help those with a 5% deposit get accepted for a mortgage.
How does it work?
Home movers, first-time buyers and previous homeowners with a 5% deposit will once again have access to 95% loan-to-value mortgages.
- The 95% mortgage will work like a standard mortgage.
- The scheme is open from next month until December 2022.
The scheme is similar to the 5% Help to Buy Government-backed mortgage scheme, which operated between 2013 and 2017. Any lender that is taking part in the scheme will have to offer a five-year fixed mortgage as part of their range of 95% LTV products.
Since the appearance of the pandemic 95% mortgages have disappeared from the market. This has left potential homeowners stranded with not a lot of help to move forward. This scheme will hopefully encourage more lenders to re-enter the 95% mortgage market.
Who can take part in the scheme?
Anyone that has a small deposit can get a Government backed mortgage. They are not just for first time buyers. They can be used for anyone that is buying a main home, including previous homeowners and movers.
Here is a brief overview of the criteria:
- the main residential home you are buying must be in the UK. (Second homes or buy-to-lets – excluded)
- the property must be worth £600,000 or less.
- have a deposit equivalent to between 5% and 9% of the purchase price.
- must apply for a capital repayment mortgage.
- You will need to pass the normal mortgage affordability criteria.
Which lenders will be offering these mortgages?
Several of the UK’s biggest mortgage lenders have already signed up to take part in the scheme from April.
How do I get a 95% mortgage?
Mortgage Squared are here to help you every step of the way. We have helped many people obtain a 95% mortgage before the pandemic hit the industry.
Details of this has not been published yet.
It is always advisable you speak to mortgage adviser as they will suggest the best option for your circumstances.