5% Deposit Mortgages Announced in the 2021 Budget
In his delivery of the budget on 3rd March, Chancellor Rishi Sunak announced that the Government will be introducing a mortgage guarantee scheme which will allow buyers to purchase a property with a small deposit of just 5%, guaranteeing a loan of up to 95% on properties valued up to £600,000.
The new scheme is similar to the Help to Buy scheme which closed in 2016, but will be available to current homeowners as well as first-time buyers, and is not exclusive to new-build properties. It’s set to run from April 2021 to 31st December 2022, and should give buyers the option to fix their mortgage rate for at least five years, if they wish to do so.
What type of home can I buy using the new 95% mortgage scheme?
You will be able to purchase any property with a value of up to £600,000 with the new scheme.
Which banks are associated with the new scheme?
Amongst those that will be offering 95% mortgages from April are Lloyds, Natwest, Santander, Barclays, and HSBC, with Virgin Money expected to follow shortly after. It’s expected that more lenders will be joining this list over the coming months.
What are the downsides?
Whilst this new scheme may make it easier for you to get onto the property ladder, it is worth remembering that paying a lower deposit will mean you will need to take out a larger mortgage, perhaps over a longer repayment term too.
Lenders in the UK will currently only lend up to 4.5 times your annual salary. So, if 95% of your property value equates to more than 4.5 times your salary, you may struggle to find a lender for your mortgage. With this in mind, it’s likely that couples will benefit from the scheme more than those looking to buy on their own.
What additional costs should I take into account when buying my first home?
As well as your monthly mortgage payments, you should also factor in the cost of a life insurance policy, if you do not already have one in place, as this is something many lenders will insist on before offering you an agreement in principle.
One of the costs you can cross off your list is the Stamp Duty Land Tax, and the holiday first introduced last year is set to be extended, with no Stamp Duty charged on properties with a value of up to £500,000!
You should also bear in mind that there will be conveyancing costs involved. Here at DRN, we offer a fixed price, comprehensive conveyancing package, allowing you to rest assured that for a set fee, with no hidden costs, all bank transfers, forms, leasehold title documentation, mortgage documentation, and administration fees will be covered.
Ready to buy? Get in touch with our team today!
DRN is a member of the Law Society’s Conveyancing Quality Scheme – a nationally recognised standard of excellence for conveyancers across the country. The scheme is only open to firms which meet the high standards set by the Law Society, and has the support of the Council of Mortgage Lenders, the Building Societies Association, the Legal Ombudsman, and the Association of British Insurers.
We have also succeeded in building excellent working relationships with a number of local estate agents over the years, having become known for our efficiency and effective communication.
Fixed fee conveyancing packages from a team you can trust. Contact our offices on 01282 433241 to get the ball rolling with your new property purchase!