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29/04/2021

95% Mortgages for First Time Buyers and Existing Homeowners

The new government-backed mortgage scheme launched last week, 19th April, but is it really making mortgages for first time buyers more accessible?

Rishi Sunak first announced the new government-backed scheme in the Spring 2021 budget, but some mortgage providers have been apprehensive, with a few not offering the new scheme.

What is a 95% mortgage?

A 95% mortgage allows you to borrow up to 95% of the purchase price of a property, meaning you’d only need 5% deposit. You may have also heard of the phrase 95% LTV – this means Loan to Value; the proportion of loan you need, in comparison with the property value.

The coronavirus pandemic saw most high LTV mortgages pulled from the market last year, but the new scheme is government-backed, which offers lenders a little more security.

Are 95% mortgages available to everyone?

Whilst already being a homeowner won’t stop you from pursuing a 95% mortgage this time around (previous schemes were first time buyers only), sadly not everyone will qualify for a high LTV mortgage.

A mortgage is often the largest amount of borrowing anyone will do, so it’s understandable that some mortgage providers may refuse someone a mortgage.

Many factors are considered when the provider is determining if they’re able to offer you a mortgage. It could be anything from your salary, any existing debts outstanding, payment history, credit utilisation, to defaults and insolvencies. If something they find concerns them, they’re able to refuse a mortgage.

How can I maximise the chances of being accepted for a 95% mortgage?

Boosting your credit file and checking for any errors or discrepancies is key. You’ll need to check across all three credit reference agencies – Equifax, Experian, and TransUnion.

You should also check that you’re registered on the electoral roll and may want to consider speaking to a mortgage adviser about your specific circumstances.

When are the new 95% mortgages available?

Many providers are advertising them currently, the scheme will run from April 2021 to December 2022.

Are there alternates to a 95% mortgage?

Yes, if you can afford to put more than 5% deposit down, it’s highly likely that you’ll benefit from a lower interest rate. The government also offer a couple of other home ownership schemes:

  • Help to Buy: A low deposit topped up by a low interest equity government loan.
  • Shared Ownership: Buy a share of a property and pay rent on the remaining share.

If you feel ready to buy a property, and want some advice on your options, you could speak to the Money Advice Service.

If the new 95% mortgage scheme has made you realise that you want to sort out your finances and work towards buying your first home, you can speak to an experienced debt adviser at Angel Advance in complete confidence. Call us on 01925 599400 or use our Online Debt Advice Tool today!

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