What is a 95% Mortgage?

What is a 95% Mortgage?

If you’ve been trying to buy your next home but haven’t been able to save enough of a deposit to do so, you could find yourself eligible for the new 95% Mortgage Guarantee Scheme that was announced by UK Government on the 3rd March. This exciting news will help many first time purchasers and existing home movers secure a property with minimal levels of deposit.

What’s 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 mortgage lender. The remaining 5% is paid by you through your traditional deposit that has either been saved or gifted by a family member.

Why are these mortgages now available?

The honest answer is, they’ve been available before but due to the COVID-19 pandemic, the availability of these mortgage products have decreased considerably. The UK Government will be introducing this new scheme to incentivise mortgage lenders to reintroduce the 95% mortgage deals from April 2021.

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 property is repossessed and sold at a loss to the lender, the Government will take on some of the losses incurred by the lender. In return, lenders will have a greater incentive to offer 95% mortgage products to people looking to buy a new home, as they’ll carry less risk.

What do I need to know?

There are a few things you should know about the new scheme. The finer details are being finalised, but this is what we understand so far.

  • It will launch in April 2021
  • You can purchase a property up to £600,000 with a 5% deposit.
  • It’s not just for First Time Buyers, it’s open to all homebuyers. 
  • Normal mortgage affordability checks will still be in place.

Can I now get a mortgage?

This all depends on your individual circumstances and affordability. This can be assessed by an expert mortgage adviser to help you understand this for your individual circumstances. However, as you now only require a 5% deposit for a 95% loan to value mortgage, many prospective homeowners could find they have enough to buy their first property sooner than they thought!

Here’s a quick example

Let’s say you were aiming to buy a home for £200,000 with a 10% deposit. Your deposit would have been £20,000. Buying the same property, with a 5% deposit could be as low as £10,000.

You can even use savings from a Lifetime ISA to put towards your deposit.

What should I do now?

Get in touch with our in house mortgage advisor today to find out whether a 95% mortgage is right for you. We’re here to chat through your options and look at the best way to move forward.

Who are Mortgage Advice Bureau?

Mortgage Advice Bureau are expert Mortgage Advisors that provided tailored advice to help every situation. Whether you are looking to buy your first home, re-mortgage or take a step up or down on the ladder they are here to assist with making sure the financial part of your move is fully protected.

Guide for First Time Buyers

Check out our “Guide for First Time Buyers” by clicking here…


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