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What is a 95% Mortgage?
First things first, a 95% mortgage is a type of mortgage that allows you to borrow 95% of the property price from a lender.
The remaining 5% is covered through your deposit.
You might have guessed it, but this all depends on your individual circumstances and affordability, which can be assessed by an expert Mortgage Adviser.
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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.
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For example, let's say you were aiming to buy a home for £200,000 through 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. If you still think you might not have enough take a look at other page on buying a home with a small deposit.
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 Government will take on some of the losses incurred by the lender.
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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.
If you've been trying to buy your next home but haven't yet saved up a big enough deposit, you could be eligible to apply for a 95% loan to value (LTV) mortgage.
This means that you may be able to buy a home with a 5% deposit.
There's a few things you should know about the new scheme:
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It will launch from April 2021
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You can purchase properties up to £600,000 with a 5% deposit
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It's open to all homebuyers (not just first time buyers)
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Normal Mortgage affordability checks will still be in place (a Mortgage Adviser will help with this)
The UK Government will be introducing a new scheme to incentivise lenders to reintroduce 95% Mortgage deals from April 2021.
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These types of Mortgages have been available previously but the number of 95% Mortgage products has largely decreased during the pandemic.
Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is £495.