Nowadays, people can start a mortgage with only 5% deposit, which is normally referred to as a 95 mortgage. This type requires 5% deposit, while the remaining 95% will be borrowed from a bank or any other lending institutions. Not qualifying for this mortgage allows applicants for other schemes in order to get towards the property ladder.
Identifying Your Deposit
Prior to a mortgage application, it is important that applicants identify their deposit. By doing so, they can find the most appropriate scheme that will fit their specific needs. In Scotland, for instance, there are various mortgage options to choose from. There are mortgages that are ideal for those with adequate income in repaying a mortgage, but struggling to pay a deposit at the same time. Such scheme is a 95 mortgage that requires only 5% deposit and the property will be owned by the applicant outright. These schemes apply to both newly-built and old properties. However, there are mortgages that are available only on newly-built property with a minimal deposit.
Understanding 95 Mortgages
Basically, 95 mortgages mean 95% mortgages. Applicants are required to give a 5% deposit while the remaining 95% is borrowed in order to acquire a property. The relatively small amount of deposit is the main benefit of such scheme. However, there are also downsides to this mortgage type. In fact, it could be risky for both the applicant and the lender, considering the minimal deposit cushion. If the property value drops down to more than 5%, the worth of the mortgage will be more than the property. This is referred to as negative equity. Applicants who are in this state eliminate the possibility of remortgaging onto another deal. As for lenders who have mortgage arrears from clients are not allowed to repossess a property.
Seeking for Professional Advice
Before applying for any mortgage, it is also essential to seek for professional advice. These professionals have an adequate knowledge in identifying which mortgage type is appropriate for a certain individual. They can also advise applicants about government schemes, considering the guarantee that the government can offer to lenders. There are many factors to consider in applying not only for a 95 mortgage, but also for other schemes, and professional advice would help significantly. https://www.90mortgagesuk.co.uk