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How to Buy a Home in Birmingham With a 5% Deposit | Mortgage Market Update 02/10/20

Mortgage Advice in Birmingham

In March 2020, the coronavirus brought the mortgage market down to its knees and to this day (October 2020) it is still struggling to get back onto its feet. The whole world has been affected in one way or another; in times like these, everyone has to try to stay optimistic, finding ways to spread positivity. Here, we will share some great mortgage news, that yes you can still obtain 95% mortgages.

If you are a First Time Buyer in Birmingham and have already been trying to shop around for 95% mortgages, you have probably realised that there aren’t many available… if any at all. Lenders just haven’t got their confidence back yet and as such, they are sticking around the 90% mark. However, there are still ways to obtain a mortgage with a 5% deposit and most applicants don’t know this. To see how it can be achieved, feel free to watch our YouTube video or continue reading on:

How to Buy a Home With a 5% Deposit | Shared Ownership & Help to Buy Equity Loan UK

Help to Buy Equity Loan

The Help to Buy Equity Loan was introduced by the government shortly after the credit crunch in 2013. Its aim was to give applicants the confidence that they needed to jump-start their mortgage journey. At the time, the Equity Loan scheme was just what the market needed, although, after time, it began to decrease in popularity due to the economy’s bounce back to normality. Fast forward to 2020 to the outbreak of COVID-19, where lenders lost all confidence in the market once again. Luckily, only a few months later (as of October 2020), Help to Buy mortgages made their way back onto the scene and now the Equity Loan is helping more applicants get onto the property ladder than ever before.

The Help to Buy Equity Loan allows you to put down 5% or more deposit on a newly built property. No matter the percentage that you put down, the government will loan you the rest to make up a total of a 25% deposit. This means that you will have a 75% mortgage and the loan percentage to pay off. Here’s a great example of a home with a £200,000 price tag:

Help to Buy: Equity Loan scheme Example


An important thing to note about the Help to Buy Equity Loan is that the loan that you get off the government (in the example above this is 20%), will need to paid off too. This loan will be interest-free for 5 years, however, if you don’t manage to pay it off within these 5 years, you will start receiving interest on the amount due. This interest rate will begin at 1.75%.

Now that you know what the scheme is and how it works, here is what you need to know in order to qualify:

  • You can only be buying a newly built property
  • The maximum purchase price is £600,000
  • This is the only property that you can own
  • You have to be buying the property for purely residential use only and not as a Buy to Let

Shared Ownership

If you don’t think that the Help to Buy Equity Loan is for you, then the Shared Ownership scheme could be what you’re looking for. The Shared Ownership scheme was introduced back in the 70s to help people who were struggling to afford a mortgage get onto the property ladder.

This scheme lets you purchase a percentage of your mortgage and then pay the rest as rent. The percentage of the property that you hold a share in is usually between 25%-75%. Since you only own part of the property, you share the rest of it with the government. The percentage that you own can be increased at a later date. People usually make this move once they have settled down or perhaps are making a little more money.

Just like the Help to Buy Equity Loan scheme, you have to qualify for the Shared Ownership scheme and meet certain requirements:

  • You can’t have a household income of more than £80,000 per year
  • Can only access if you can’t get a mortgage any other way
  • You need a good credit history
  • You can only own this property

You can find out more information on the official government’s website: https://www.gov.uk/affordable-home-ownership-schemes/shared-ownership-scheme.

Are they suited for you?

If you are struggling to obtain a mortgage and want to get onto the property ladder, one of these schemes could be your ticket to begin your mortgage journey. If you want help in deciding which scheme could be best suited to you, you should approach a Mortgage Broker in Birmingham like us.

Both the Help to Buy Equity Loan and the Shared Ownership schemes are great ways to begin your mortgage journey, especially in unprecedented times like these. Although, before you rush into anything, it’s always wise to weigh up your options and see what will benefit you most.

Summary

To summarise whether or not it is still possible to get a 95% mortgage… yes it is, however, your options are limited.

To speak with a professional Mortgage Advisor in Birmingham and to get our expert opinion, get in touch with Birminghammoneyman. We have been in the mortgage game for over 20 years now and have lots of experience with pointing customers in the right direction. Choosing the right option is much harder when you are doing everything on your own, which is why your Mortgage Broker in Birmingham is here to help from 8am-10pm, 7 days a week. We hope to hear from you soon!

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