The government has just announced the introduction of a mortgage guarantee scheme to help buyers, with a small deposit, to purchase a property.
Here Andrew Kidd, a Financial Consultant from Embrace Financial Services (EFS), who work in partnership with Your Move, provides some answers to questions you may have about the scheme.
What is the mortgage guarantee scheme?
The scheme is available from April 2021 and offers the chance for first time buyers, as well existing homeowners, to obtain a mortgage loan of 95% of the value of a property, provided they can raise a deposit for the remaining 5%. As it’s a high amount, lenders are being incentivised by the government (through a guarantee system) to encourage them to make the funds available to borrow.
How popular do you think this announcement will be?
This announcement is a real boost to buyers who may have been struggling to save for a deposit. The fact that it applies to any property under the value of £600,000, a new build or an older property, and is not restricted to first time buyers (as some schemes are) means it’s probably going to be very popular although time will tell.
What should I do to improve my chances of getting one of these mortgages?
Anyone looking for a mortgage should make sure that you have your finances in order before applying for one. Lenders will be analysing your spending habits, what existing loans and financial commitments you are committed to and what your future prospects are. Ultimately they need to feel confident that you can pay back the loan over the term of the mortgage. There are handy guides available to help focus your attention on this and help in preparing for a mortgage appointment.
Which lender should I choose?
Choosing the right lender is really important as well as being able to compare deals and products across the market. Not all lenders will be able to offer the 95% mortgage, for example, and for those that do, some may have different lending criteria and be more selective in their approach to accepting applications. That’s when it’s really important to use a whole of market mortgage broker, like EFS, who will understand which lenders are participating and what might influence your success in getting one.
Can't I just choose a lender and seek their advice?
You could but choosing to go to just one high street lender, perhaps because you know the name, isn’t always the best idea. Whilst they may be offering this high to loan value mortgage, they will have set criteria in place that might not necessarily make you an ideal applicant for them. Looking at a number of lenders, however, offers you more options and a greater chance in finding a mortgage that suits your personal circumstances.
What should I do next?
Once you have a good idea about how much money you’ll need to pay for a property, and you know you can afford a deposit of around 5% of its value, it’s worth booking an appointment with a mortgage broker, ideally one that has access to a panel of lenders. They should be able to help you in understanding the mortgage options and help you in preparing a mortgage application. Even if this new scheme is not the right one for you, a good broker can often come up with others options and possible solutions.
If you’d like help in understanding the new mortgage guarantee scheme, or in finding any mortgage or remortgage, why not book an appointment with Embrace Financial Services today?
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.