95% mortgages – how to choose the right one?

November 8th, 2016
95% mortgages – how to choose the right one?

Does the idea of grabbing a 95% mortgage deal excite you? With the ever rising home and property prices, it becomes difficult for the first time home buyers to see their dream home turning into reality. Most of them cannot save more than 5% of the actual price of the house they want to buy. However, things can become smoother as the UK government is coming into the picture to support you in buying your dream home. Although the best interest rates are still offered to borrowers with deposits as big as 40%, there are many deals offered to buyers who have just 5% of the home value.

How to get a 95% mortgages?

Most of us consider a mortgage to be our biggest financial obligation. Due to this, it becomes quite important to get the right mortgage for ourselves and when you have to make a choice between the deals that offer 95% of the mortgage value, things can become relatively easy as you have fewer options to choose from. One thing that you need to be acutely clear about is whether you want the mortgage at a fixed rate or variable rate of interest. This plays a big role in repayments and hence should be considered when making a strategy for buying a home.

Wouldn’t it help if I save for a larger deposit?

Well, there have been times when lenders used to offer mortgages with 100% of the property value. However, things have changed and you now need at least a 5% deposit to crack a mortgage deal. It is again very clear that if you can deposit a bigger amount then you are certainly eligible for more competitive deals. This is one of the reasons people save money and pay for larger deposits. On the other hand, things can turn against you if there is a rise in prices of houses in the real estate market.

What is the amount one can borrow?

Traditionally, the borrower’s salary was the basis for calculating the amount to be lent. However, things have changed now and lenders are keen to check your incomings and outgoings plus your credit report to figure out the exact amount they would like to offer. To make things simple, you can use a mortgage calculator to get an estimated value of the amount you can borrow.

What is the role of the government in the mortgage process?

Well, the UK government is playing an active role in getting you a mortgage deal even when you can pay just 5% as the deposit amount. This was initially available only if someone wanted to buy new build properties but the rules have changed now. They have been modified and made easy to facilitate 95% mortgages to more number of people.

To be eligible for a 95% mortgage, you need to buy a property with an estimated worth less than £600,000 and you should be able to manage the 5% deposit value. Once this is well in place, the government will offer 15% of the property value which can be accessed when the lender offers a fee. These transactions fall under the Help to Buy scheme offered by the government. You will often find that most of the home deals does not belong to Help to Buy but are still quite competitive. So, keep that in mind to make a wise choice.

How to choose the right 95% mortgage deal?

It is quite simple, but still requires a prudent thought process. You need to first decide between fixed rate and variable rate.

When you choose fixed rates, you don’t need to worry about the fluctuations in the monthly repayments. There will never be surprises for you and you can fit the repayment amount in your monthly budget.

In case of fixed rate deals, the interest rates are generally higher than variable repayment rates. You would also find yourself bound to a pre-decided period of time and if you decide to get out of the deal before this time, you will need to pay an Early Repayment Charge (ERC).

In case, you want to go with variable rate deals, you need to choose between the tracker mortgages and discount mortgages. Tracker mortgages are streamlined with the Bank of England base rate while discount mortgages depend on the lender’s standard variable rate (SVR).

With any of the deals you choose, do take into account the legal fees and charges required to foolproof the deal. You can use FreePriceCompare’s mortgage calculator to check which deal works out the best for you.

You can easily compare your 95% mortgage options and select the most profitable deal with FreePriceCompare.com. We have some of the best mortgage experts and advisers who can offer an on call consultation. Therefore, to find the best 95% mortgage deal for you, just check our website freepricecompare.com or feel free to contact our highly proficient team of mortgage advisers on 08008807656.

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