95% Mortgadge 5% Deposit are back.
You're ready to get on or move up the property ladder, but you don’t have a big deposit with a 95% mortgage you could buy your home for as little as 5% of deposit.
A 95% mortgage is a secured loan that covers 95% of a property’s value. You’ll need to provide a deposit for the remaining 5%.
So, if you want to buy a home valued at £200,000, a 95% mortgage will cover £190,000 of the cost and you’ll need to put down a 5% deposit of £10,000. 95% mortgages are also sometimes referred to as 95% LTV mortgages.
LTV stands for loan to value.
95% mortgages are good for first-time buyers, who often struggle to save up more than a 5% deposit, but they won’t offer as much choice as those who can put down a bigger deposit. They also tend to come with higher interest rates.
Due to COVID-19, 95% mortgages are currently very difficult to find and it’s not known when they will reappear on the market. So, if you’re looking for one, you may have to wait – or focus on saving a larger deposit towards a home.
Here are a few considerations
- Please bear in mind that your monthly mortgage payments will be higher with a 95% mortgage when compared with a mortgage with a lower LTV
- You always need to consider the risk of borrowing a higher amount secured on your property. If the value of the property falls below the amount of the outstanding loan, you may find it difficult to repay the mortgage if you sell the property
- It is important to consider the amount of deposit you are able to put in yourself. Lower interest rates may be available to you should you be able to provide a larger deposit.
