The return of 5% deposits for First Time Buyers
The property market can be daunting for first time buyers and add Covid-19 into the equation and you have a challenging situation. However it’s not all doom and gloom as property expert Emma Taylor explains:
The property market is facing unprecedented demand partly fuelled by the changes the pandemic has brought with it.
At Battens Solicitors, we appreciate that trying to get on the property ladder for the first time can be a difficult experience, but especially for those who have been trying to secure a mortgage in the last year. In 2020 interest rates were rising and the majority of Mortgage Lenders were no longer accepting deposits as low as 5%. This was because Mortgage Lenders were limiting the distribution of mortgages offered and only typically accepting those who needed to borrow a smaller amount from them and who had a higher deposit. This made it almost impossible for the majority of first time buyers who would only be expected to have smaller deposits.
Now that the economy is starting to open up again, we have seen a rise in mainstream Mortgage Lenders such as Natwest, Nationwide, Halifax and Santander beginning to accept not only 10% deposits, but also 5% which is great news for those now buying for the first time or even those looking to purchase on again.
What is a 95% Mortgage?
- A 95% mortgage; known as a 95% loan to value (LTV) mortgage, is a mortgage to purchase a property with a small deposit (at least 5% but less than 10% of the purchase price). This mortgage will be provided on completion with a term set and you will then pay the mortgage off monthly once the purchase transaction has completed.
- Your deposit is the amount of money that you need to put towards the property to make up 100% of the final purchase price.
What does this mean for a First Time Buyer?
A Mortgage Lender is likely to allow you to borrow more than they would have done in recent years. You can find a property to buy once you have saved at least 5% of the purchase price and, as long as the Mortgage Lender believes this is affordable for you, they will lend the remainder of what you need to purchase the property. This means that you could be eligible to buy your first home even earlier than you thought and you don’t have to save quite as much money to do so and get onto the property ladder.
Should you, a friend or colleague be looking to purchase a first home, please do not hesitate to get in contact with a member of Battens’ Residential Property Team for a quote or further information which we should be happy to provide. For further information please contact Emma Taylor on 01935 846205 or email firstname.lastname@example.org
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