Are 95% Mortgages Still Available
Yes, 95% mortgage deals are still available â but theyâre not as widely available as other types of mortgages.
Thatâs because lenders see them as a higher risk. By borrowing 95% of a propertyâs value, lenders have more to lose if the borrower defaults . Thatâs why higher LTV mortgages tend to have higher interest rates.
This level of risk is why lenders withdrew many of their low deposit mortgages from the market at the height of the pandemic. But now, to encourage lenders to offer 95% mortgages again, the UK government has launched a mortgage guarantee scheme.
Can You Get A Mortgage With Bad Credit
You dont need a perfect credit score to get a first time buyer mortgage. And a particularly poor score might not be a problem, either.
The interest rate that mortgage lenders offer will typically go up the worse your credit score is.
You may not be able to get a mortgage with a traditional mortgage lender if your score is particularly poor.
However, there are specialist mortgage lenders that cater for those with bad credit. But they typically offer mortgages with higher interest rates.
There are ways you could increase your credit score, including paying off old loans and making sure youre on the electoral roll admittedly easier said than done, in some circumstances.
Learn more:
How to get a mortgage with bad credit
How to improve your credit score
What Is A 95% Mortgage
A 95% mortgage or, more formally, a 95% LTV mortgage sees you as the prospective home buyer supplying a deposit worth at least 5% of the value of the property you want to buy. The remaining money thats the other 95% would come in the form of the mortgage itself.
For example, if you wanted to buy a home worth £300,000, for a 95% mortgage you would need a deposit of £15,000. If the property cost £200,000, meanwhile, you would need £10,000, and if it cost £500,000, you would need a 5% deposit of £25,000.
These types of mortgages became available to first-time buyers and current homeowners alike in April 2021, when the government introduced a new 5% deposit scheme. This is also known as the mortgage guarantee scheme.
When looking for a low deposit mortgage in general, you will usually be offered the following types of mortgage rates:
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% Ltv Mortgages 5% Deposit Mortgages Faqs
Are 95% mortgages available?
There are always more mortgage options open to you if you are borrowing at a lower loan to value. If you are looking for a 60% LTV mortgage, for example, there will be plenty of lenders to choose from.
This isnt the case for borrowers with only a small deposit, with fewer lenders providing deals above 90%. The pandemic has caused lenders to become even more cautious about lending to these borrowers to the point that there are very few deals around or above 90% LTV.
Thats why the government launched a mortgage guarantee scheme in April, which covers a portion of the losses incurred on mortgages offered between 91% and 95% LTV should the borrower fall behind on their repayments to the point that the lender has to repossess the property.
The idea is that this will make these deals less risky to offer for lenders and hopefully become more common. A similar scheme announced by the coalition government back in 2013 worked in much the same fashion.
What is the lowest deposit for a mortgage?
The smallest deposit you can buy a house with is currently 5%. A more common ‘low’ deposit is 10%, as borrowers have far more options if they want to borrow 90% of the property’s value.
What is considered a low deposit on a house?
Its important to note that some products are marketed as 100% LTV mortgages, but these are reserved for those with a guarantor or existing customers and under specific conditions.
What is the 5% mortgage scheme?
What is an LTV?
How Does A Family Assist Mortgage Work
You may have heard this type of mortgage called a guarantor or springboard mortgage, they are all technically the same.
This type of mortgage allows you to purchase a home with a 5% deposit, but also if you have ZERO deposit.
The lender will take a charge over a family members home as security.
This type of arrangement doesnât work for everyone, and it is vital that you take proper advice as defaulting on the loan can have serious repercussions for your family member.
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Do I Need Good Credit To Get A 95% Mortgage
A low deposit is sometimes synonymous with little or no credit history, meaning that it might be difficult to secure a mortgage. However, Lending Expert can help you find out your options in the case that you have bad credit or a lower credit score.
Using Lending Expert as your mortgage broker will allow you to get the best deal for your financial circumstances, whether that be a 95% mortgage or otherwise!
Quotes From Other Lenders Involved In The Scheme
Susan Allen, CEO Retail and Business Banking at Santander said:
We know that raising a large deposit can often be challenging for potential home buyers, so were pleased to be part of the governments Mortgage Guarantee Scheme offering a range of 95% mortgages to help both first-time buyers and home movers.
As one of the UKs largest mortgage lenders we see how important homeownership is to our customers and we use our wide experience and expertise to support them throughout the home buying process.
Michelle Andrews, HSBC UKs Head of Buying A Home said:
We have supported home buyers and the wider housing market throughout the pandemic and are excited to support the Mortgage Guarantee Scheme.
After such a turbulent year it is great that this scheme will make a real difference in enabling first time buyers who didnt think they would have a chance of getting a mortgage and home movers to get the keys to their new home.
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Can I Get A 95 Ltv Mortgage On A New Build Home
As 5% deposits have made a comeback, it is now possible to purchase a new build property through a 95% LTV mortgage via specific lenders. Skipton Building Society is one such lender and certain others have followed suit, partly because of the mortgage guarantee scheme that reduces financial risk. Some new build homes can also be purchased through affordable home schemes, such as Shared Ownership and Help to Buy, so there is further incentive to buy a new build home.
To find out which lenders will offer you a 95 LTV mortgage loan on a new build home, get in touch with our team today.
Why The Down Payment Matters
The down payment affects your chances of approval. The more money you put down, the less the lender must provide. In the eyes of the lender, this means a lower risk. The amount you borrow compared to the value of the home is the loan-to-value ratio, or LTV. The LTV affects your eligibility for specific loan programs. It also affects your interest rate and fees. The higher the LTV, the higher risk the lender takes. Higher risk often means more costs and higher interest rates.
Usually having a large down payment shows a lender financial responsibility. Don’t worry if you don’t have 20% to put down on a home, though. There are other ways to show financial responsibility including:
- Low use of available credit
- Timely payments on all bills
Lenders piece together different aspects of your financial life. They use this puzzle to determine your loan program, fees, and interest rate. A higher down payment gives you more investment in the home. This usually means a lower likelihood of default. However, it does not always make sense to use up your entire savings to make a large down payment. We discuss this in more detail below.
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Is A 70 Ltv Good
A 70% LTV mortgage is at the lower end of the typical range usually, lenders offer LTVs between 50% and 95%. With a 70% LTV, lenders are taking on less of a risk, so you’ll have a wide range of competitive options to choose from, with better deals and a lower total cost than you would with higher LTVs.
How Long Will These Mortgages Be Available
The Government-backed 95% mortgage scheme came into force on the 1st of April 2021 and will run until December 2022.
The standard 95% Products *should* be here for goodâ¦. Almost all high street lenders are offering a 95% LTV product at the moment, whether they are a standard product or a government-backed option.
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What Are My Other Options With A 5% Deposit
A further option if you are struggling to save a large enough deposit is the Help to Buy Equity Loan scheme. This is another government initiative which enables you to get a mortgage with just a 5% deposit. However, it is only available to those buying a new-build home.
With this scheme, the government will lend you up to 20% of the propertys value. Along with your 5% deposit, this enables you to access mortgage deals at 75% LTV which are cheaper. In London, the government will lend up to 40%. Theres no interest to pay on this government loan for the first five years.
However, as a borrower with a 5% mortgage, dont make the mistake of assuming you can only get a mortgage via a government scheme.
More lenders including the Nationwide, Yorkshire, Coventry and Leeds building societies are now offering 95% home loans on the open market. And some deals may offer better value than those on offer under government initiatives.
How Our Best 95% Ltv Mortgage Comparison Works
Our comparison tables make it easy to find the best 95% LTV mortgage for you. At the top of the tables youll find our direct deals – This is where you can simply click on the Go To Providers Site button for a hassle-free way to get more info and apply direct to the lender. Underneath these are all the other 95% LTV products currently in the market place. To reorder the whole table into rate order, just untick the box at the top of the search table.
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Can I Get A 95 Ltv Mortgage If I Am Moving Home
Mortgages of this kind are often reserved for first-time buyers but providing your current home isnt in negative equity, you may still be able to secure a 95% LTV mortgage. You would need enough money for the deposit, either through equity you have built up in your home or your savings, and you would need to meet the eligibility criteria of the lender before they offer you a new mortgage.
Avoid an early repayment charge
To avoid an early repayment charge, you should first consider porting your existing mortgage. This is especially true if you are happy with your current deal as this will rule out any additional borrowing. Your mortgage advisor will recommend this option to you if they think it is more cost-effective than a 95% LTV mortgage. Get in touch with us to learn more.
Advice On Mortgage Rates
Mortgage rates have rocketed since the government’s mini-budget on 23 September.
If you’re thinking of buying a home or need to remortgage this is likely to impact you.
For the latest news and advice on dealing with inflated mortgage rates, see the below stories, which are regularly updated:
If you’re worried about making your mortgage payments, see our guide on what to do if you can’t pay your mortgage.
Also Check: What Is The Longest Mortgage Term Available
Ltv: Fannie Mae Conventional
If you have a little more money available for a down payment, consider a standard Fannie Mae loan. These loans require only 5% down. On the $150,000 loan, this means $7,500. That equates to $3,000 more than the Conventional 97 loan, but you don’t have to be a first-time homebuyer to qualify.
There are a few differences between the Conventional 97 and standard Fannie Mae loan. Fannie Mae sells both on the secondary market. They both have similar qualifying requirements too. The largest difference, however, is the amount of mortgage insurance you will pay. Lenders base PMI on your loan-to-value ratio and your credit score. With the lower LTV, you have a chance of paying less in insurance. You may also secure a lower interest rate because of the lower LTV required for a standard Fannie Mae loan.
Pros And Cons Of A 95% Ltv Mortgage
The big positive of a 95% LTV mortgage is pretty simple it means that you can purchase a property with a modest deposit of just 5%. This may mean that you get onto the property ladder much quicker than if you are forced to save for longer in order to put together a more substantial deposit.
» COMPARE: 95% LTV mortgages
However, there are some clear downsides to 95% LTV mortgages. The first is availability. There simply arent many lenders who are willing to take on the level of risk that comes with a 95% LTV mortgage, so you dont have many deals to choose from. Its because of this that the government has launched the mortgage guarantee scheme which it believes will boost the number of 95% LTV mortgages on offer.
You also need to consider the interest rate. Generally, lenders charge higher interest rates as the LTV increases youll pay a higher interest rate on a 90% LTV mortgage than on an 80% one, for example. That higher interest rate means that the size of your monthly repayment is larger, and that paying the loan off entirely will cost you more overall.
Finally, there is greater risk of negative equity. This is where the size of your outstanding mortgage is greater than the value of the property, which can make it difficult if not impossible for you to remortgage or move home. Buying with a small deposit means that the value of your home only needs to fall by a relatively small amount to leave you in negative equity.
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What Are The Pros And Cons Of A 95% Ltv Mortgage
Purchasing a property is a huge investment, so you need to choose your mortgage product very carefully. This means, if youre considering taking out a 95% LTV mortgage, its vital that you consider all of the different pros and cons associated with this.
Here, well talk you through the advantages and the disadvantages so you can make an informed decision.
How To Choose The Best 95% Ltv Mortgage Deal For You
Since you only need to have a 5% deposit, 95% LTV mortgages are very popular with first time buyers. The advantage to these is that they tend to have better interest rates than 100% LTV mortgages. However, its still important to shop around to ensure that you are getting the best deal for your needs.
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Repayment Vs Interest Only
When you take out a mortgage, youll need to repay both the capital and interest . But you can choose to repay the capital bit by bit or in one go at the end of your mortgage term.
Capital repayment mortgages include portions of both the capital and interest within your monthly payments. Youll pay this each month until the mortgage is paid off. These cost more on a monthly basis, but usually work out cheaper over the long run.
Interest only mortgages dont include a portion of the capital within your monthly payments. Youll pay the capital in one go at the end of the mortgage term. These cost less on a monthly basis, but usually work out more expensive over the long run.
Learn more:
What is an interest only mortgage?
The Help To Buy: Equity Loan Scheme Is Closing Soon
To use this scheme, youll need to apply to Homes England by 31 October 2022. You can still apply for a Help to Buy: Equity Loan mortgage after 31 October 2022, but after 31 March 2023, you wont be able to access the equity loan from Homes England, and you wont be able to complete using a Help to Buy: Equity Loan mortgage.
With a Help to Buy equity loan, you can add to your deposit on a new build property.
In England, youll need to be a first-time buyer. In Scotland and Wales, even if youre not a first-time buyer, youll still qualify, as long as youre moving to a new build.
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How To Find The Best 95% Ltv Mortgage
While you can definitely do your own research and speak to the lenders who are already on your radar to determine where youre going to get a great deal, the best 95% LTV mortgages can typically only be found through well-connected mortgage advisors. So, its always best to speak to an expert mortgage broker who can find you the perfect mortgage product that otherwise wouldnt be available to you.
Having the help of a mortgage broker can be invaluable, as theyll be able to consider all of the relevant factors, including how much youre looking to borrow, how much you have saved, what your credit rating looks like, and how long you would like to be making repayments for. Then, they can use their knowledge and expertise to point you in the direction of the deal thats going to tick all the right boxes for you.
