During the Spring Budget 2021, the government had announced a new mortgage guarantee scheme that aims to help both first-time buyers and existing homeowners.
The new 95% mortgage scheme will enable buyers to purchase a property with a 5% deposit. For many homebuyers, this could help them get onto the property market sooner as they can save for a smaller deposit.
How does the new mortgage scheme work?
This new mortgage scheme will begin from April 2021 and will be supported by the government, allowing homebuyers to buy homes that are worth up to £600,000 with a 5% deposit.
The government will be able to guarantee compensation for lenders by covering some of their losses should a buyer default on their mortgage payments. This means that lenders are likely to be less reluctant to offer mortgages that are worth up to 95% of a home’s purchase price or valuation, which enables homebuyers to proceed with a 5% deposit.
In typical circumstances, lenders may ask for a 15% or 20% deposit for a home and for many, this may not be easy to save for. This new mortgage guarantee scheme helps homebuyers by allowing them to secure a mortgage with a 5% deposit.
According to data from Rightmove, they reveal that approximately 86% of properties that have been listed on their website have an asking price of £600,000 or less.
Is this scheme exclusive to First Time Buyers?
The mortgage scheme will be open to all homebuyers, not just first time buyers, as confirmed by the Government. Whether you are looking around the property marketing for your next home or you are a first-time buyer, you could benefit from this new scheme.
How do I apply for a 95% mortgage?
Many major lenders are now taking part in this new scheme including NatWest, Barclays, Santander, and HSBC, with many more to be taking part soon after. It’s important to note that the usual mortgage affordability checks will still be carried out in order to determine whether the buyer can comfortably afford the monthly repayments.
If you or anyone you know would be able to benefit from the new mortgage scheme, please feel free to get in touch with us. We’re here to help you and answer any questions you may have.
Is this scheme different to Help to Buy?
With the current Help to Buy Equity Loan scheme, the government will lend up to 20% of the value of a newly built home from an approved developer and then shares in any increase or decrease of the property’s value.
In order to be eligible for this scheme, the property must be your only property and your place of permanent residence. The maximum property value or purchase price under this scheme is £600,000.
Your cash deposit must be at least 5% and then a mortgage of up to 75% to make up the rest. For the first five years of owning the home, you will not be charged loan fees on the 20% loan.
About Stuart Mosley
Stuart Mosley (CeFA, CeMap, CLTM) founded SJ Financial Solutions in June 2005 having spent 12 years with big corporates such as Halifax and Santander. He felt the personal touch and straight speaking was missing from financial and mortgage advice services and set up SJ Financial Solutions to change this.
If you would like to book an appointment then please get in touch and we can arrange a suitable time to discuss further. We can arrange appointments at a place and time suitable to you, we can discuss your options over the phone or if you prefer email, then this is fine with us.