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What is a 95% mortgage, and what is the new government mortgage guarantee scheme?

What is a 95% mortgage, and what is the new government mortgage guarantee scheme?

A 95% mortgage enables you to borrow up to 95% of the purchase price of the property you want to buy, with the remaining 5% made up of your deposit.

An arrangement such as this will sometimes be referred to as a 95% LTV mortgage, where LTV stands for ‘loan-to-value’ ratio. In other words, the mortgage is for 95% of the property’s market price.

A 5% deposit could help you get on the property ladder sooner, as you’ll need to save less of a lump sum.

The lowest mortgage interest rates are reserved for borrowers with large deposits of around 40% or more, but there are competitive deals for buyers with just 5% to put down.

Just be aware that a smaller deposit does mean that your choice of mortgages will be more limited.

What is the mortgage guarantee scheme?

A new government-backed mortgage scheme will help first time buyers or current homeowners secure a mortgage with just a 5% deposit.

The scheme was announced in the March 2021 Budget and is designed to encourage lenders to start offering 95% mortgages again, after nearly every single one was withdrawn during the pandemic. Under the terms of the scheme, the government guarantees the portion of the mortgage over 80% (so, with a 95% mortgage, the remaining 15%). This might sound complicated, but in practice it just means the government will partially compensate the lender if a homeowner defaults on (fails to pay) their mortgage. 

Why has the government launched this scheme? 

The Covid-19 pandemic started in March 2020 and the number of low-deposit mortgages fell.  The scheme aims to give lenders the confidence to offer 95% mortgages again by taking on some of the risks involved with doing so. 

How do I find out more?

You can contact us and we will discuss your options with you,  and find the right mortgage for your individual needs. 

https://www.meridianmortgages.net/contact-us

Call us on 0116 2720083

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Our extensive knowledge and experience, along with our access to a comprehensive range of mortgage products across the UK, including access to exclusive deals, enables us to find the most suitable mortgage for you and your circumstances. We want to help you buy your new home and make the process as simple as possible.

As Specialist New Build Mortgage Advisers, we can find the most suitable mortgage for you. Meridian has been helping our customers buy their dream homes for over 25 years.

 

Because we play by the book we want to tell you that…

Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances.
There may be a fee for mortgage advice of up to 1% of the amount borrowed. A typical fee is £99 but this will depend upon your circumstances.

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