It’s been a couple of weeks now since the government announced that they will be supporting lenders to be able to start offering 95% mortgages again. The scheme will be slowly starting to kick in over the coming weeks, so what could it mean for those who have previously struggled to get on to the property ladder?
First things first, let’s recap what the mortgage guarantee scheme is and how it will work.
A 95% mortgage means that the lender is advancing 95% of the value of the property in the form of a mortgage. The remaining 5% will be paid as a deposit by the buyer. 95% mortgages are nothing new but since the beginning of the Covid 19 pandemic lenders had withdrawn such large loan to value mortgages due to the unstable economic situation. This has meant that unless you had a minimum of 10% deposit, you were unable to purchase a home.
Under the new scheme, the government have agreed to guarantee the larger mortgages so that there is much less risk for the banks and they can feel more confident about lending higher amounts.
So, if you have previously been unable to get your feet on the first rung of the property ladder it’s likely to be because you couldn’t raise a 10% (or more) deposit.
To put it in context, on a property that’s worth £300k that would be a whopping £30k! An impossible target for many potential buyers. Now, under the new scheme, there will be mortgages available that would enable you to buy that same £300k property but with a deposit of only £15k.
So who is eligible for the new scheme?
Well anyone really.
It’s not exclusively for first time buyers and of course, all the usual checks will still apply. Lenders will need proof that you can afford to make the monthly repayments on the loan. The value of the property you are buying can be no greater than £600k and it can be any property, not exclusively new builds as we’ve seen with some help to buy schemes over the years.
So if you’ve been saving for a deposit and thinking you might never get there, this might just be your chance! Look out for the new 95% mortgages coming on to the market, do your due diligence and give it some thought.
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