How does the scheme work?
Under the scheme, all home movers with a 5% deposit will once again have access to 95% loan-to-value mortgages.
The 95% mortgage will operate as most 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.
This scheme will start in April 2021 and due to finish in December 2022.
Who can take part in the scheme?
All buyer’s with with 5% deposit at loan to value can get one of these Government-backed mortgages.
What is the criteria:
- The property is not worth more than £600,000. You will not be able to apply if the property costs more than this.
It must be your main residential home in the UK. So these mortgages can’t be used for second homes or buy-to-let properties.
- You must have a deposit equivalent to between 5% and 9% of the property’s purchase price. That means you’ll have a mortgage LTV between 91% and 95%.
- You must apply for a capital repayment mortgage. This means that you won’t be able to apply for an interest-only mortgage.
- You will need to pass a lender’s normal mortgage affordability criteria.
Remember, the rates tend to be higher if you’ve got less than 10% deposit so if you can push for a 10% deposit then you’ll get access to a cheaper mortgage. Mortgages typically become cheaper at 90%, 80%, 75% and 60% LTV.
This scheme will help the lower end of the property market which has been suffering as the mid range property market has been boosted by the stamp duty holiday. This has not helped the younger generation get onto the property ladder. 123estateagent welcome this government scheme with open arms.