95% Mortgages Explained!


95% mortgages are back. But can YOU get one? How easy is it to get your hands on one? Who's entitled to them? What are the restrictions?

Our Practice Principal Bobby Sherlock explains what a 95% mortgage is:

Put simply, a 95% mortgage allows you to borrow 95% of what the house you're buying is worth. It means that you only need a 5% deposit to be able to buy. The Government recently opened up a "mortgage guarantee scheme", which provides the lenders with part compensation if they should occur any losses due to repossession. So, if everything goes wrong, it reduces the risk for the lender, meaning they're happier to open up more products at 95%.

Why would somebody want or need a 95% mortgage?

95% mortgages are ideal for those who struggle to save a bigger deposit to buy their property. Generally, that's first-time buyers, but it could be people who are looking to move up the property ladder. It's also important to note that here are a few restrictions on who can apply for the government mortgage guarantee scheme. These include:

  • It can only be used for residential properties and not buy to let or second homes.
  • There's a maximum purchase price of 600,000.
  • The scheme itself only runs until December 2022.

Something else to consider is that we have now seen other lenders coming out with 95% products where they are not using the guarantee scheme, which we feel is a really positive sign for the market.

How easy is it to qualify for these 95% mortgages?

Even with the government's guarantee scheme, you still have to meet the lenders criteria… you still have to pass the income and affordability checks…. And you also still have to pass the lenders own internal credit score. 95% mortgages will be more difficult to get than a mortgage where you have a bigger deposit especially as the credit score might be a bit less stringent. As a general rule, the bigger deposit you have, the easier it is to get a mortgage and the more choices and options you are available to you.

Bobby's Top Tip:

Speak to an advisor that you trust and go through the options with them. Have a look at the affordability. Check that you're eligible. Make sure that everything fits and get a decision in principle done BEFORE you start looking at houses.


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Monday, 27 June 2022

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