5% Deposit Mortgage Guarantee Scheme
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5% Deposit Mortgage Guarantee Scheme
Do you dream of buying a home one day? You know you can afford the mortgage repayments because they would be less than you’re paying in rent, but saving up the deposit is virtually impossible.
Not any more.
With the Government’s new 5% Mortgage Guarantee Scheme launched April 2021, you can apply for a mortgage with just 5% deposit. To put that into perspective, it means you will be able to put down just £10,000 on a £200,000 property.
If you’re already a homeowner, but your family is growing and you need more space, you can benefit from the 5% deposit scheme too.
More mortgage lenders will be offering 95% LTV mortgages as banks and building societies pledge their commitment to the scheme.
Read on to find out how this new scheme could benefit you and your family, and how The Mortgage Mum can help you find the right 5% deposit mortgage to suit you.
What is the Mortgage Guarantee Scheme?
The 5% deposit mortgage guarantee scheme is a new type of Government programme. It’s designed for First Time Buyers and existing homeowners who want to move up the property ladder.
If you have 5% of the purchase price of a property saved for a house priced at less than £600,000, and you have an excellent credit record, you could qualify for this type of mortgage deal.
These mortgages can be used for new-build and existing residential properties. You will need to live in the property yourself, so they can’t be used to purchase second homes or buy-to-let properties.
Why Is The Government Doing This?
The Government wants First Time Buyers to realise their dream of owning their own first home. Plus it wants would-be home movers who’ve outgrown their properties to upscale and make room for new buyers looking for starter homes.
It also wants to kick-start the housing market following lending uncertainty because of job insecurity during the Covid-19 pandemic. So it’s giving lenders the confidence to offer 95% mortgages.
The Government is doing this by guaranteeing a portion of the costs if a customer fails to make mortgage repayments and their property is repossessed.
The idea is to make these mortgages easy for lenders to arrange, administer and sell responsibly, as well as being simple, easy and attainable for would-be homeowners to apply for.
Frequently Asked Questions
Do I need to have a good credit history to obtain a 95% Deposit Mortgage?
- Yes, these mortgages are only available to borrowers who have a good credit rating.
How do I improve my credit rating?
There are lots of ways to improve your credit rating. Here are a few:
- Check your credit score with one of the well known credit agencies. The Mortgage Mum have an affiliate relationship with Check My File, where you can get a 30-day free trial. Check My File sees your data from all 4 credit agencies, not just one, and is consistently rated excellent on Trustpilot. Your trial, and the subscription, can be cancelled at any time. Beyond the 30 day free trial, the service is charged at £14.99 per month. Click here to check your file now.
- Pay off any debt on your file and ask previous creditors to remove old paid-up debt.
- Make sure your name and address are correct on the Electoral Roll.
- Pay all your bills via direct debit so you can’t make a late payment.
What other fees will I need to pay?
It’s important to factor in the following costs in addition to your mortgage deposit.
Arrangement Fees
Mortgage lenders will ordinarily charge a fee for the arrangement of the mortgage. The amount varies from lender to lender and some offer no arrangement fees for those in certain jobs.
Valuation Fees
Mortgage lenders require that you have your chosen property independently valued, again, these fees will vary.
Legal Fees
There are a range of legal fees payable during the mortgage application process, such as conveyancing and local authority searches. You will need to appoint a solicitor to carry out these functions.
Broker Fees
At The Mortgage Mum, our initial consultation period is completely free. Your final fee will be confirmed and agreed prior to a Decision in Principle taking place.
The fees noted above are provided as a guide to indicate the costs you are likely to incur when buying a property. All fees should be confirmed by your solicitor.
Speak to an expert
We will work at times that suit you and your family, carrying out appointments via video call, telephone or email, giving you the benefit of first class service, around your own schedule, and in the comfort of your own home. So let us handle your mortgage today and find out how well we can look after you, The Mortgage Mum way!
Stamp Duty
Stamp duty is usually due on the purchase of any home. We recommend you check the government website for up to date information on calculating how much you will need to pay.
https://www.gov.uk/stamp-duty-land-tax
https://www.moneyhelper.org.uk/en/homes/buying-a-home/everything-you-need-to-know-about-stamp-duty
Are there any qualifying criteria for this type of loan?
Yes, there are specific criteria that apply to the new 5% deposit mortgage guarantee.
- You must live in the house you buy with the mortgage. Mortgages for second homes or a Buy to Let properties are not included in the Scheme.
- The mortgage must be taken out by an individual (or individuals), not a limited company. It must be a repayment mortgage – not interest-only.
- The mortgage must be for a UK property sold for £600,000 or less and have a loan-to-value (LTV) of between 91% and 95%.
- The mortgage must have started (originated) between 1 April 2021 and 31 December 2022, which are the dates specified by the scheme.
- It must meet standard requirements in terms of assessing your ability to pay the mortgage. Your application will be assessed using a loan-to-income and credit score test.
How Can The Mortgage Mum Help Me?
Are you ready to take advantage of one of these 5% deposit offer mortgages now? Or do you know you could easily save for a 5% deposit between now and the end of 2022?
Then it’s time to get advice from a mortgage broker you can trust. Using an online mortgage calculator is ok to get an idea of how much you could borrow, but we know it’s always best to talk to a real person.
At The Mortgage Mum we understand mortgages for families, so we’re best placed to help you achieve your dream of buying a home using a 5% deposit guarantee mortgage. We’re here to:
- Get to know you and help find out what type of property you want to buy
- Work out your budget, how much you can borrow and find the mortgage you need
- Walk you through the costs that go with buying a home
- Fill out your application for you and help you compile all the documents
- Submit your application to a lender on your behalf, and
- Liaise with them to make sure you’re kept up to date on your mortgage application, every step of the way
At The Mortgage Mum it’s our philosophy to educate you along the way, remove any financial jargon and make you feel at ease. So let’s make a start today.
Why The Mortgage Mum
- We're a team of mums who understand the juggle
- We're all expert advisers with a wealth of experience
- We work around you and your schedule
- We're here to make the mortgage journey easier for you
Most common faqs
The big question! We recognise that this is the first thing people want to find out when they come to us. Different providers follow very different criteria, and those criteria are changing all the time, making it a tough answer to determine. That’s why it’s a good idea to contact an experienced and responsible broker like The Mortgage Mum to scan the current market and identify the product that will afford you the maximum spending power in the housing market. Contact one of our experienced, trustworthy advisers and rest assured we will find the best solution for you.
In normal circumstances our stock answer currently is 5%. However, dependent on circumstances, there are some products that allow a zero contribution from you. Get in touch to see if you could be eligible for a zero deposit mortgage.
The Government change stamp duty rules quite often and the best way to find out what levels of stamp duty are payable is to use the Government’s Stamp duty calculator or speak to one of our advisers today.
There is no ‘one size fits all’ answer anymore and that’s why so many people ask us to help them with their mortgage. The best thing is for you to get in touch and give us some info, and together we’ll determine the level of borrowing that’s most appropriate for you.
You can find information via these links regarding first time mortgages, residential mortgages, buy-to-let mortgages and second charge mortgages, or give our advisers a call, they’ll be happy to answer any mortgage related questions you may have.
We need to get to know the background of your business in order to determine what kind of commercial finance may be available – but the first step is to get in touch with us and let our experts advise you.
