More and more lenders are adding 95% mortgages to their range of available loan products. In fact, 95% mortgages are the only product which has increased in availability so far in 2019.
As a result, those looking at loan-to-value ratios of 90% and below now having fewer deals to choose from than they did last year.
But what does borrowing 95% of your home's value mean in the long term? And is it worth it to get on the property ladder faster?
A 95% mortgage allows you to borrow up to 95% of the purchase price of a property you want to buy and put down just 5% as a deposit.
Only needing a 5% deposit means you don't need as much cash to hand and can shave years off the time you need to spend saving up.
Typically, the best mortgage deals are reserved for borrowers with big deposits of 40% or more, but there are plenty of competitive rates available to buyers with just 5% to put down.
As more lenders look to enter the market, competition should mean that rates for 95% mortgages stay low, at least for now.
Having a bigger deposit will allow you a wider choice of mortgages, usually at lower rates. So if you're not in a rush, saving for a little while longer will usually mean you're better off in the long run.
However, if you're renting while saving, there's a good chance you feel like you're wasting money - especially with interest rates being relatively low. It's also worth noting that if property prices were to rise, you may end up having to save for even longer.
It's worth considering all your options and weighing up the pros and cons of each strategy, before deciding on your next move.
Lenders will take your income, outgoings and credit score into account when deciding how much they’re prepared to lend you. These factors will also influence whether they're prepared to offer you a 95% mortgage or not.
An independent mortgage advisor can tell you how likely you are to be accepted before you apply. This will save your application being rejected, which can hinder future attempts to secure a mortgage loan.
When choosing a 95% mortgage, you’ll have fixed-rate and variable-rate deals to choose from:
A fixed-rate mortgage usually has an introductory term of between two and five years, during which time your interest rate (and therefore your repayments) will stay the same. This is a popular option as it offers peace of mind, in that you don't need to worry about rates going up.
At the end of your introductory period, you will be switched onto your lender's standard variable rate (SVR), which is almost always higher. This is often when people look to remortgage.
There are two main types of variable-rate mortgage - tracker and discount mortgages. Tracker mortgages follow the Bank of England's base rate and discount mortgages offer a discount on the lender's standard variable rate. When it comes to discount mortgages, the rate you will be offered will depend upon your circumstances and the lender's individual criteria - this will vary from lender to lender.
The government has several schemes in place for potential first-time buyers, all of which can be a huge help if you're struggling to save a big deposit.
From the Help to Buy ISA to the shared ownership scheme, you'll find all the information you need here.
There are a lot of 95% mortgage products on the market and more being introduced every month. This can mean it gets a bit confusing when it comes to deciding which one is best for you.
If you're struggling, an independent mortgage advisor can offer you expert advice on which products offer the best value and which you're most likely to be accepted for.
Even better, if you get in touch with Key Mortgage Advice, we'll guide you through the process for free!
Our Facebook is growing every day (thank you!)
To save time and make it easier for you to find out if we can help with what you're looking for, we thought we'd list our services in a handy little blog!
For our new followers, keep reading to find out how Key Mortgage Advice can help you with finding the best possible deal, whatever your needs and circumstances:
Whether you’re looking for your first or fifth property, we can help you get the right mortgage. Every lender has a unique set of policies and criteria, which must exactly match the circumstances of the borrower. Therefore, arranging a mortgage has never been more complex. Our wealth of experience and knowledge of the underwriting criteria for each individual lender allows us to successfully direct applications and complete on over 95% of all mortgage cases. We have access to the whole market of mortgage products, meaning we are truly independent and will help guide you to the most competitive and suitable mortgage product for your circumstances.
Many lenders now offer discounted interest rate deals for an introductory period – normally for two, three or five years. At the end of the introductory period, they’ll usually revert to a higher rate. However, that doesn’t mean you have to stick with the higher rate; like most things nowadays it is important to shop around to see if you can save some money. If you want to know more about how we can help you to save money on your monthly mortgage payments, or to swap to a better interest rate, then contact us and we’ll see if we can get you a better deal.
If you’re a homeowner, you may have seen the value in your home increase over time. Lifetime Mortgages allow you to tap into some of this value and release a cash sum. A lifetime mortgage is designed for people over the age of 55 and allows clients to either buy a new home or release money from their current property without the need to make any monthly repayments during the lifetime of the loan. This is because the loan and interest are rolled up and repaid by the sale of your property when the plan ends; this is normally when you die or move into long-term care.
In many cases, we can visit you in your own home or, if you prefer, we can provide a telephone consultation. If you wish to proceed with a recommendation, we offer full support with the mortgage application, legal forms and completion matters to ensure the process is as straightforward as possible. In addition, we will offer you our full support going forward, should you require any further advice.
Buy-to-let mortgages are specifically designed for investors who want to buy a property and rent it out. These are usually more expensive than normal mortgages, but they could help you to become a property investor. If you don’t own your own home outright, or with a mortgage, finding a buy-to-let mortgage may be difficult.
Most buy-to-let mortgages are interest-only, meaning that you won’t be paying off the mortgage itself and you’ll have to pay the outstanding capital at the end of the mortgage term. The other key differences from normal mortgages include:
However, any rental income you earn from a property can be offset for tax purposes against the interest only mortgage payment, so owning buy-to-let properties can be a tax-efficient investment product.
Since March 2016, buy-to-let mortgages have come under greater scrutiny. New affordability tests were implemented which mean that older home-owners may struggle to get a buy-to-let mortgage as lenders often require borrowers to repay the whole loan back before they retire.
Obtaining a commercial mortgage relies heavily on the attractiveness of the proposition to a lender. Therefore, the involvement of an experienced and well-connected advisor is hugely important. As independent specialists, we negotiate business mortgages with a range of lenders including major banks, commercial building societies, regional and local building societies, and specialist commercial asset lenders. The appropriate commercial lender is purposefully selected to meet your needs. Terms for business mortgages are not set in stone and our role in the transaction is to negotiate the best mortgage rate and terms. Our wealth of experience and market knowledge means we understand what is likely to be achieved given a specific set of circumstances. We are able to assist with transactions for purchasing premises to trade from or for investment opportunities for commercial landlords.
In addition to the services listed above, we can also assist and advise on a whole host of other products, including:
Back in November 2017, we opened our newest office on Hoghton Street in Southport. It was hard work at the time, but now we love providing mortgage advice in Southport.
Nothing compares to the feeling you get when you move into new business premises; it’s a place to house your dreams and work towards your goals, but how do you pick the right one? The key is to narrow your options based on your limitations and requirements until the perfect premises becomes apparent:
Firstly, you need to decide the terms on which you want to rent/buy your business premises. There are three main options: licensing, leasing, and purchasing. They all offer varying levels of flexibility and security, and you should think about your long-term ambitions and the length of time you want to remain in the premises:
Licensing usually requires a small deposit of one month’s rent and then you pay your rent monthly or quarterly in advance. This requires the least amount of up-front capital and offers the greatest amount of flexibility, but the least security. You can terminate the contract with minimal notice, allowing you to move quickly if you want to upsize or switch location. The downside being, so can your landlord, meaning you could be asked to vacate the property earlier than you planned. Licensing is often popular with small businesses and start-ups who have minimal capital and may want the flexibility of a short-term contract.
Leasing allows you to sign a contract granting you tenure of a property over a longer term, sometimes as long as twenty-five years. Established businesses are more likely to opt for leasing over licensing as it offers a higher level of security. However, it’s important to check the terms of the lease in regard to early vacation of the property, else you could be stuck paying the rent if you leave earlier than planned. Rent is reviewed at agreed intervals in most cases, which could mean you pay above market rate for years if prices fall.
Purchasing a premises allows you the greatest amount of freedom, you can alter the property as you wish, stay as long as you like, and sell up if you decide to move. However, it means having a substantial amount of capital to put down as a deposit. Also, market conditions have to be considered and how they will affect the value of the property over time. Buying business premises tends to be the option taken by big, well-established companies and investors who plan to lease them out.
When thinking about viable business premises, your budget is a huge factor. There’s no point wasting your time viewing places that you can’t afford, so it makes sense to consider this early. Have a look at the funds available to you and decide on a budget for your project. If you’re looking to buy, it’s a good idea to speak with a mortgage advisor and get an agreement in principle so you know how much you’re able to borrow.
Once you’ve set your budget, you can then move on to other key areas for consideration:
The type of business you plan to run will dictate the required location, in most cases. Retail operations and restaurants, for example, are often better suited to town-centre locations which receive a high amount of footfall and offer good transport links. Whereas, if you conduct most of your business via online channels, an out-of-town location will probably seem better value.
Think about how your customers find and do business with you:
Your vision in terms of space and layout will be unique to you and your business. However, there are common things which everyone needs to consider:
Wherever you decide to set up shop, we wish you the best of luck in finding your ideal business premises! If you’re looking to start a business venture, or buy a property (commercial or otherwise), give us a call or drop in for a chat and we’ll help find the perfect mortgage deal for you. Our contact details and office locations are available here.