- What is LTV (and are 95% LTV mortgages possible?)
- A Handy Video Guide To LTV
- A 5% house deposit (or 95% LTV mortgage) – A message from an advisor
- Government Mortgage Guarantee Scheme
- LTV (Loan-To-Value) Table Guide
- Low Deposit Mortgages (options if you have a 5% deposit)
- First Steps To Getting A Mortgage
Update 28th April 2021:
With the government-backed 5% mortgage deposit scheme now live and 5% offerings outside of this also available, we are ensuring that our customers are in a good position to take advantage of any great deals as they happen. If this is of interest to you, please choose “match with an advisor” and fill in your details. This will allow us to confirm some details with you and match you with a suitable advisor. This will also give the advisor notice of your interest in the scheme and they can prepare to help you accordingly.
(Estimated time to complete form: 3 minutes)
What is LTV (and are low deposit mortgages possible?)
So you’ve saved up a big old chunk of savings for your house deposit (congrats!) but what’s next?
When you use a mortgage to buy a home, you’ll be looking at mortgage product suitability, along with other criteria, by what’s known as the LTV or Loan-To-Value. It’s pretty much what it sounds like – the proportion of the total cost of the property that will be covered by your mortgage loan.
Whilst there are products out there that may be suitable. It’s important to understand what differences you’ll see between say a 95% LTV, 90% LTV and 85% LTV product. There may be differences in the interest rate that make it worthwhile waiting it out – but your Mortgage Buddy Advisor can help you with that.
5% Deposit Mortgages
Our expert advisors are up to date on all things mortgages and with access to the whole-of-market, they get a good insight into what products are currently available.
Here’s what they had to say:
Due to COVID-19 and uncertainty for lenders, almost all were looking for at least a 10% deposit for products where applicants have clean credit, unless it was a product like help-to-buy equity loans where a 5% deposit may have been viable. We’re now in a position where the government can guarantee a 5% deposit, (as of April 2021) and some lenders are offering 95% LTV mortgages outside of that. Schemes such as these are so important to help people access mortgage products and we’re thrilled that there are now more options for those who can’t get 10% deposits together.
(16th March 2021)
So for now, higher LTV (Loan-To-Value) mortgages can be more tricky but the important thing is that there are options out there for buyers who aren’t in a position to get massive deposits together.
Government Mortgage Guarantee Scheme
In the March 2021 budget, a new mortgage help scheme was announced.
With this new scheme, applicants taking out a mortgage should not see much difference on their end. It is lenders that will be incentivised to offer the 95% mortgage products. For them, the security comes from the government guarantee on loans.
Many high street names have already opted into the scheme, with more expected to join.
This is terrific news for many who find it hard to save for a deposit, although it’s important to bear in mind that other affordability criteria may still apply.
Loan-To-Value (LTV) Table
Here’s a useful tool to help you visualise what LTV you may be looking at. For this example, we’ve used a house valued at £100,000 as a model.
No (or Low) Deposit Mortgage Options
When an advisor looks into your application there are loads of things they will need to consider. This is why we recommend taking a no-obligation initial conversation, even if you aren’t ready yet. You’ll get an idea of how you can proceed and when, and you’ll learn plenty of things that no mortgage calculator can tell you!
Your options if you have a 5% deposit could include:
- Help-to-Buy Mortgages – A popular alternative, these can require as little as a 5% deposit. The scheme offers applicants an equity loan that lets them borrow for an interest-free deposit. Buyers are able to repay this equity loan at any time without any additional charges. If you don’t repay, when you sell, the government will take a stake from the property’s current value. This scheme is restricted to new-build properties with a value under £600,000. There are lots of rules for this type of mortgage so it may be worth speaking to an advisor.
- Right-To-Buy Mortgages – Some lenders will allow applicants to use their right-to-buy discount as a deposit. This is, however, at the discretion of the lender and the relevant local authority.
- Guarantor Mortgages – Not as common this year, but this option would see a lender place a friend or relative’s savings in a savings account for a fixed amount of time as security against the mortgage. This again will vary between lenders and availability of these schemes is inconsistent in 2020.
- Gifted Deposits from Family and Friends – Sometimes borrowing funds from loved ones is an option; the caveat will be that lenders require a signed letter to say that the applicant will be under no obligation to pay this money back to the source of the deposit.
First Steps To Getting A Mortgage
Once you’ve got an idea of where you stand, we’d always recommend speaking to an advisor – even if you don’t go ahead right now.
They’ll be able to give you an idea of a reasonable and doable timeline for your mortgage application.
When you’re matched for free through Mortgage Buddy, your initial scoping conversations and advice from your advisor are free and no obligation. This stage is to analyse where you are, and if there are any bad-credit elements to your application that need to be allowed time to minimise the impact on your credit profile.
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