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What is a 95% Mortgage?

Great news, 95% mortgage have returned! in laymen’s terms, a 95% mortgage is where you borrow against 95% of a property’s price, making up the 5% excess with your deposit. Here is an example with a property valued at £150,000:

If a property gets valued at £150,000 and you manage to receive 95% mortgage offer on the property, you will need to put down your 5% deposit of £7,500 and borrow the remaining £142,500.

95% Mortgage Advice in Birmingham

Following the March 2021 Budget, the Government released a Mortgage Guarantee Scheme for Lenders to push confidence back into the property market to help any home-buyer purchase a property with a 95% mortgage. The scheme only works with First Time Buyer or Home Movers in Sheffield.  

Chancellor Rishi Sunak confirmed that many credible lenders are already backing the scheme, which is excellent news for the mortgage market! What we do know is the scheme will run until December 2022, so you have plenty of time to take advantage of it.

The scheme has specific criteria that you’ll need to match to qualify for it. Your Mortgage Advisor in Sheffield will check to see if you meet the scheme’s requirements.

Our Mortgage Broker in Sheffield offers all of our customers a free, no-obligation mortgage consultation. During this process, we will be able to recommend the best-tailored mortgage based on your circumstances.

Can I get a 95% mortgage?

Whether you are a First Time Buyer in Sheffield or planning on Moving Home in Birmingham, you should be able to access a 95% mortgage (depending on your financial and personal situation). Before being accepted for a 95% mortgage, you’ll need a good credit score and be required to prove that you’ll be able to meet your monthly mortgage payments.

Improving your credit score

Having a good credit score will always benefit your mortgage application and chances of being accepted for your 95% mortgage. Ways to improve your credit score can include: 

🏠 Paying off any outstanding debts that you owe. 
🏠 Closing unused credit accounts.
🏠 Registering on the electoral roll.
🏠 Removing your financial links to others

There are many different ways to improve your credit score, so if you need further credit score Mortgage Advice in Birmingham, don’t hesitate to contact our team. Alternatively, you can look at how to improve your credit score article, which goes into greater detail.

Affordability 

You will never be accepted for a mortgage when you cannot afford one, and that’s why lenders need to measure your affordability for a mortgage before getting accepting. They will factor in all of the costs of buying a home in Sheffield and assess whether you’ll be able to meet your monthly mortgage payments. You need to provide details of your income and monthly outgoings (usually through bank statements) so that your affordability for a mortgage gets backed up.

Can my family help me get a 95% mortgage?

With the rising popularity of gifted deposits, as a Mortgage Broker in Birmingham, it’s not unusual for them to get used to mortgage deposits. A gifted deposit is a sum of money given to an applicant to aid their mortgage application, either by covering the whole of their mortgage deposit or a portion of it. It’s usually parents who give their children a gifted deposit.

Gifted deposits can boost an applicant’s mortgage application. If the applicant already has a portion of their deposit saved up, this extra cash boost could push them above the 5% mark, and they may have even more of a chance of being accepted for a mortgage.

You should know that a gifted deposit is strictly a gift and not a loan; lenders won’t accept it otherwise.

How do I choose the right 95% mortgage?

There are many different types of mortgages available, so when you choose a 95% mortgage, you will want to make sure that you select the best option for your financial and personal situation.

For example, if you choose a 95% Fixed Rate Mortgage, your interest rate will remain the same through your mortgage term, whereas if you choose a 95% Tracker Mortgage, your interest rate will follow the Bank of England base rate.

Alternatively, you could pick a 95% Interest-Only or a 95% Repayment Mortgage. An Interest-Only mortgage will allow you to pay cheaper mortgage payments each month until you need to pay a lump sum at the end of your mortgage term (usually taken out for Buy to Lets). A Repayment Mortgage will combine interest and capital each month into one payment.

How can a more considerable deposit help with my mortgage? 

Usually, the bigger deposit that you can provide and evidence for your mortgage application, the better. It’s better to save up and prepare for your mortgage journey, as lots of costs can come with it! Things that might crop up include higher interest rates, remortgaging difficulties due to less equity, and negative equity. 

Having a larger deposit, for example, a deposit of 10-15%, would not only lower your interest rate significantly but would also put more equity in the property and reduce the risk of negative equity as you would be borrowing less against the property in question. 

There is good news though, some of these costs can get avoided if you are well prepared. If you are saving for a property, sometimes it may be better to save up just a little more to boost your total deposit.

If you decide to use a Mortgage Broker in Sheffield, we will ensure that you are in the best position possible to get accepted for a mortgage. You may not need a larger deposit as other factors in your application may be perfect! You won’t know until you get in touch with our Mortgage Advisors in Sheffield today.

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UK Moneyman Limited is authorised and regulated by the Financial Conduct Authority.
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