What Is A 95% Mortgage And Who Is Eligible?

Posted by Chris Ringham on Jul 8, 2021 9:39:08 AM

What Is A 95% Mortgage And Who Is Eligible

The mortgage guarantee scheme enables first-time buyers and home movers to purchase a property with just a 5% deposit. The scheme was launched in April 2021 and runs to December 2022. It forms part of the government’s strategy to maintain buoyancy in the housing market.

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95% mortgages all but dried up during the COVID-19 pandemic, so the programme is intended to kick-start opportunities for those with a low deposit to get onto or move up the housing ladder.

How The Scheme Works

There is little practical difference between the scheme and other routes of securing a mortgage for house buyers. Mortgages offered under the scheme are not always the cheapest option, so property purchasers are encouraged to consider their particular circumstances and still shop around for the best deal.

The main difference is for lenders who are incentivised to offer 95% mortgages with the government guaranteeing outstanding loans if the buyer defaults and there is insufficient equity on the property to maintain a profit margin.

What Is A 95% Mortgage?

As the name suggests, a 95% mortgage is a secured loan for 95% of a property’s price. The buyer puts down 5% of the value as a deposit. Sometimes, these products are referred to as “95% LTV”. LTV stands for “loan-to-value”, meaning that it is the percentage of the property’s price covered by the mortgage.

How Much Deposit Will You Need For A 95% Mortgage?

To illustrate a deposit required to access the government 95% mortgage scheme, consider the following.

According to the Office for National Statistics, the average house price in the UK was £249,000 in January 2021. A buyer would require a deposit of £12,450.

However, house values vary markedly across the UK. Zoopla says that the average property in the North East was £197,160 in May 2021 (requiring a 5% deposit of £9,858) and in the South East it was £407,548 (requiring a 5% deposit of £23,777).

What Properties Are Eligible For 95% Mortgages?

The main eligibility criteria for the 95% mortgage scheme are:

You must be buying a main residential home in the UK.
Some lenders exclude new build properties from their schemes.
The property must be valued under £600,000.
The scheme is available on repayment mortgages.

The scheme is not available for buy-to-let or second home investors, or interest-only products.


Can First-Time Buyers Get A 95% Mortgage?

Any buyer with a small deposit can access the scheme, including first-time buyers. Ultimately, who is eligible for 95% mortgages will still come down to the bank or building society’s affordability and lending criteria.

Can You Get 95% Mortgages On Shared Ownership Properties?

There is a separate government-backed flexible home ownership option in the form of the Shared Ownership scheme. This allows you to buy a share of 25% to 75% of a property. Some lenders offer products for 95% mortgage shared ownership options.

How Can I Get A 95% Mortgage?

The process to apply for a loan under the government 95% mortgage scheme is the same for any standard mortgage.

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Topics: Conveyancing solicitor, Residential and commercial conveyancing, First Time Buyers