18/05/2021
Under the scheme, first-time buyers, home movers and previous homeowners with a 5% deposit will once again have access to 95% loan-to-value mortgages (meaning the loan is for 95% of the property's value).
The 95% mortgage will operate as any standard mortgage would for you, the buyer. As far as you are concerned, there will be no difference between a 95% mortgage offered through this scheme and a 95% mortgage offered outside this scheme.
For the mortgage lender however, the scheme guarantees that the Government will shoulder some of the cost if the lender lost money. Eg, if the borrower had failed to keep up with mortgage payments and the property was repossessed, but the subsequent property sale did not recoup the outstanding mortgage amount.
(To be geeky, the Government would cover 95% of any losses a lender made on the amount of the mortgage above 80% loan-to-value. Eg, on a £100k property with a 95% mortgage, the lender would not have a Government guarantee on the first £80k, but the Government would then guarantee 95% of the remaining £15k).
The scheme will open next month and run until December 2022.
The scheme is similar to the 5% Help to Buy Government-backed mortgage scheme, which operated between 2013 and 2017. Any lender that is taking part in the scheme will have to offer a five-year fixed mortgage as part of their range of 95% LTV products.
Since the onset of coronavirus, 95% mortgages have all but disappeared from the market – leaving many potential homeowners stranded. This scheme is therefore designed to encourage more lenders to re-enter the 95% market.
Need anymore information give Lee a call today to discuss: 07971 873660
Source: https://www.moneysavingexpert.com/mortgages/new-mortgage-scheme-for-5-deposit/
