What you should know about 95% mortgages

Under 95% mortgages, property purchases up to £600,000 are possible with just a 5% deposit.

The mortgage guarantee scheme: defined

A 95% mortgage enables you to borrow from a lender at 95% of the property's cost. The final 5% is covered by the deposit.

When were these made available?

This programme was established by the UK government to encourage lenders to resume offering 95% mortgage packages in April 2021. It was also recently extended until December 2023.

According to the plan, the UK government would serve as a safety net for lenders. In the worst situation, if or when the property is repossessed and sold at a loss, a portion of the losses made by the lender are shared by the government. Due to the reduced risk, lenders are more motivated to provide 95% mortgage solutions to clients wishing to purchase a new house.

Need-to-know

There are a few things you need to understand about the scheme:

• With a 5% payment, you may purchase a property worth up to £600,000
  All homebuyers (not just first-time purchasers) are eligible
  The standard affordability criteria for mortgages will still be in effect

Can I get a 95% mortgage?

As you might have envisioned, everything depends on your unique situation and borrowing power, which can be determined by a qualified mortgage adviser. However, given that a 95% LTV mortgage only requires a 5% deposit, many aspiring homeowners may discover that they have enough money to purchase their first home.

For instance, suppose you wanted to use a mortgage with a 90% LTV to purchase a £200,000 house, it would have cost you £20,000 as a deposit.

Your deposit for a mortgage with a 95% LTV might be as little as £10,000. You may even contribute to your deposit with funds from a Lifetime ISA if you’re worried that you don't have enough.

Whether you want to know if a 95% mortgage is the right choice for you, or you simply want to discuss your options, we’re always willing to assist. Please feel free to reach out to us.