95% Mortgages Are Back!

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95% Mortgages Are Back!

Generation Rent to become Generation Buy! 

The new Government First Time Buyer incentive scheme where only a 5% deposit is required, is due to come into place from April 2021.

95% mortgages are backThe chancellor Rishi Sunak has introduced this scheme to incentivise lenders to provide mortgages to first-time buyers and current homeowners with deposits as low as 5% on properties worth up to £600,000. The lenders will receive a guarantee from the government to enable them to provide mortgages covering the remaining 95%.

The scheme is very similar in many ways to the previous Help to Buy scheme, with the main differences being; 

It is available to current owners and First Time Buyers, and is not limited to new builds only.

All lenders under the scheme will also offer mortgages fixed for at least five years which, according to HM Treasury, would provide options for consumers with smaller deposits who want the security and predictability of a mortgage with a fixed rate over a longer term.

Sami Bickford, Managing Director of The Mortgage Girl commented, “It has been impossible for anyone with only a 5% deposit to buy their first property for over a year now, unless puchasing a new build property and taking a Help to Buy Equity Loan. This sector is crucial to ensure the whole property market functions well as they are often First Time Buyers. This scheme should be a real bonus for many of our clients who have been saving for a 10% deposit but are keen to buy their first home now.

We have seen a lot of interest in 95% products over the last few days and I’ve summarised a few key points below based on one lenders 95% Mortgage products to explain the criteria that you would need to meet to be eligible for this type of mortgage.

✨First Time Buyers (FTB) Only: For the moment, 95% products is only available to FTB’s.

✨What income can be included? 95% LTV is available to employed and self-employed applicants.

They can include additional income (overtime, bonus, commission etc.) as ‘non-guaranteed’ provided we have evidence of this income for the last 2 years ( using the average, or latest if lower).

✨Client Profile: An application for a 95% mortgage is unlikely to be approved where a client has a low credit score, recent adverse data or high indebtedness (for example, credit cards with balances close to limits, has recently taken out loans etc.)

✨95% LTV is not available for New Build & Flats (exception – shared ownership – 95% is open to all new build shared ownership houses).