What you need to know about 95% LTV mortgage for first time buyers
Mortgage options with a 5% deposit
Getting onto the housing ladder is now harder than it has ever been especially with rents increasing to take up the money that you would like to have used to save for a deposit. Therefore many potential first time buyers get to the point at which they have managed to scrape together a 5% deposit and then begin to look at mortgage options. However there are few things you need to know before you jump into trying to get one of these mortgages.
Can anyone get a 95% LTV mortgage?
Unfortunately because of the perceived high risk of having a deposit this small lenders then put in additional criteria and conditions that you have to satisfy in order to be able to take out this type of mortgage.
Criteria to get a 95% LTV mortgage
The first thing you will need in order to apply for a 95% LTV mortgage is a good credit record. You will need to prove that you have a good record of making payments on time and not falling behind on things like credit card payments. In addition to this you should also be registered on the electoral roll and have a good steady income from employment or self employment of more than 2 years.
You will also need to have a sufficient income in order to be able to make the payments. Lenders will usually offer you between three and four times your salary if you are buying a property on your own, or around two and a half times your combined salary if there are two of you buying the property. A mortgage broker will be able to quickly assess your application to give you a firm understanding of how much you can borrow and what the likely repayments will be.
One of the new tests that has been brought in to help lenders judge the amount of risk they are taking on you will also need to show that you would be able to continue to make repayments even if the interest rates increase significantly in the future. You will also have to provide evidence of your income and outgoings, particularly if you have credit cards that you do not clear every month.
What are the risks?
The main risk is that if you are on a low income you will probably not be offered the mortgage. There is also the fact that you will find that you end up paying up to 6% interest on your mortgage, which is a lot higher than for mortgages with much lower loan to value ratios and at the end of your fixed rate deal you could find your repayments go even higher.
Make use of a broker
A mortgage broker has a specialist understanding of the lenders available on the market. They will be able to quickly assess your application and give you the best advice on what options are available at 95% loan to value. They can discuss rates and fees for each mortgage product and give you an idea of how much you can borrow and what the exact repayments will be each month.