Originally launched in April 2021, 5% deposit mortgages (or 95% mortgages) had the goal of stimulating the market and enabling more people to be able to purchase their first home or move to a home that was more suitable for their needs.

The scheme is also known as The Mortgage Guarantee Scheme because it means that the Government will guarantee the portion of mortgage over 80% (so, the last 15% for example), meaning if a homeowner defaulted the lender was able to be partially compensated.

This scheme had the effect of giving lenders more confidence and major lenders such as Lloyds, Santander, Barclays, HSBC, NatWest and Virgin Money continue to offer 95% mortgages for residential purchases.

Here are seven key FAQs that we are often asked about 95% mortgages and if you would like to discuss your situation, do reach out to the team.

1. Who is the scheme open to?
   Despite the scheme’s primary aim to assist first-time property buyers, it is open to anyone who wishes to take advantage of it. Even if you or someone you plan to purchase with has owned property previously, the scheme is a viable option.
2. Is there a deadline?
   Yes, there is a deadline and to take advantage of the scheme, you must secure a mortgage before December 31^st 2023. The scheme was extended from December 2022 and may be extended further.
3. Are there any restrictions?
   The scheme’s mortgage must be used to purchase your primary residential home, and it cannot be used to purchase a second home or a property for buy-to-let purposes.
4. How much can I borrow?
   The scheme applies to all properties priced up to £600,000, including new and old properties. In expensive areas such as London, this may limit your options.
5. Can I choose an interest only mortgage?
   No, a repayment mortgage is mandatory under the scheme. This means that monthly repayments will be higher, but you will own the home outright after completing the mortgage term.
6. What kind of interest rates am I likely to get?
   As a result of the lower equity in the property, interest rates are anticipated to be higher than they would be under different circumstances. It is recommended that you shop around for various deals to get the best possible rate. Consider renegotiating your mortgage when your initial deal expires to save money.
7. Are income checks carried out differently?
   Although the government offers a guarantee, it’s still necessary to demonstrate your ability to make repayments.It’s important to be realistic about the amount you borrow and what you can afford. Furthermore, lenders will scrutinize your credit report to evaluate the probability of default, so reviewing it beforehand is advisable.

95% mortgages can be a great option and if you are looking at moving or purchasing your first home, then do drop our team a call on 01322 553282 or contact us online and we will be happy to help.