A new mortgage guarantee scheme has been announced by the government which offers the chance for buyers with a deposit of just 5% to purchase a property. Here we provide information and answer some questions you may have about it:
What is the Mortgage Guarantee Scheme?
- From April 2021
- To first time buyers and existing homeowners
- To buy a new or older property, provided its value is under £600,000
- To buyers who can raise a 5% deposit and gain the remaining 95% of the value of the property through a mortgage loan from a lender.
Will all lenders be participating in the scheme?
Not necessarily. Some lenders may decide that they do not want to take part in the scheme, despite guarantees from the government, and some, although taking part, might apply different lending criteria. It’s important, therefore, to review as many of the lenders as you can, and what they offer, ideally with the support of a mortgage broker.
What is the government guarantee to lenders?
A mortgage loan of 95% of the value of the property is high and some lenders have been reluctant, particularly in recent times, to lend this high amount. As an incentive, therefore, the government is providing a guarantee to cover part of the mortgage loan to reduce the risk to them.
I’m interested in the new scheme, what should I do?
There are a few steps you can take:
1.If you’ve not already done so, find out how much deposit you may need to raise to buy a property and if you can afford this. Research property values and calculate 5% of this.
2.Review your income and spending habits to find out how much you may be able to afford to pay for a mortgage each month. It’s a good time to see if you can reduce any monthly outgoings or if there is anything that suggests you would struggle financially by having a mortgage. Now is the time to take action i.e. curbing your spending, cancelling outdated subscriptions, reducing credit card bills etc. You could also try to improve your credit score. We’ve got some handy guides on our website that might help you.
3.Start gathering information in preparation for a mortgage appointment, we’ve put together a checklist on our website that provides advice and also guidance about how an appointment with us will take place.
4.Book an appointment with a mortgage broker, ideally one that has access to a panel of lenders, such as Embrace Financial Services, who can probably provide more choice to you than if you went to just one high street lender. We’ll be able to provide advice on the new scheme and also discuss other options which may be available to you, if needed.
How do I book a mortgage appointment?
It’s easy. If you’d like to find out more about the mortgage guarantee scheme, or mortgages generally, simply book an appointment with us online via our website, here.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.