Recent mortgage Q&A
Why banks are offering 5% Deposit Mortgages For First Time Buyers
Mortgage schemes with 5% deposit
First time buyers often struggle to get onto the property ladder through no fault of their own. Houses are notoriously expensive, and it can be difficult to get together the deposit needed to fund a mortgage, while still paying rent, heating and water bills. Buyers often find that they have to save for more than 5 years before they are even close to the percentage demanded by banks, and sometimes it is easier just to keep renting and never take out a mortgage. Recently, the way that first time buyers have been forced out of the housing market has lead the government and financial institutions to take a step back and consider whether they are able to help new borrowers.
How first time buyers have been offered 5% mortgages
The government decided that the best way to help first time buyers onto the mortgage market was to introduce the Help to Buy scheme, which offered lenders an option to buy guarantees on any first-time mortgages that they offered. This ensured that the banks would get their money back, no matter what happened. With this guarantee in place, more and more banks have started to offer mortgages to borrowers with small deposits. The smaller deposits can range from 5% to 10%.
Can I get a Help to Buy mortgage?
Help to buy mortgage application
If you are a first time buyer who wants to purchase a home in the UK (England, Scotland, Wales and Northern Island, but except the Isle of Man), then you may be able to get a mortgage under the new Help to buy scheme. This means that, if you have saved a sum which is more than 5%, and the house that you want to purchase is for you to live in as your sole property, and is worth less than £600,000, you could get a mortgage under this scheme. You will also need to prove that the house you are buying is not a New Build home, designed to help first time buyers, and that you are not using other forms of mortgage schemes run by the government, and agree to take on the mortgage with a capital and interest repayment scheme. If you can fulfil these obligations, then you should be able to get a mortgage with a 5% deposit.
Who will offer me a 5% mortgage?
Once you have saved up enough money to put down a deposit on the home that you want, you will need to be able to find a lender that will be able to help you raise the rest of the money in the form of a mortgage. The banks are the most common type of lenders for these types of loan, but there are also others, including the Post Office and building societies, which are able to offer 95% LTV mortgages. You can also obtain fixed rate loans for at least 24 months, which will help you to reduce the overall amount of the mortgage before you have to start paying the interest rates. You may also find that you get a better deal from companies who are not formally banks, such as Virgin Money. They may be able to find you a loan that is similar to the banks’, and with the same level of LTV, but with more flexible deals on fixed rate loans.
You need to do research into the types of loans you could obtain with your deposit, and this means looking at all of the options available. Be aware that some companies will only offer to first time buyers, while others will not allow a combined income of less than £100,000 per annum.
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