NatWest 5 Deposit Mortgages

How To Get A Mortgage With A 5% Deposit

Not all lenders offer 5% deposit mortgages (95% LTV) and those that do have set criteria to determine whether they are happy to lend on this basis.

The good news is that in recent years a number of lenders have relaxed their criteria for this type of lending. Things to be mindful of include:

• Lenders will charge you a higher rate on interest on your mortgage if you only have a 5% deposit. If you can get your deposit up to 10% this will help get the cost of borrowing down.

• While some lenders will be happy to lend if you have a 5% deposit, their decision to lend will be based on affordability criteria so factors such as your income, previous credit record and the amount you wish to borrow.

Help To Buy Mortgages

This scheme helps you get on the property ladder by making the cost of a mortgage more affordable.

It allows you to take out a loan which you then add to your deposit for a house you want to buy.

The scheme is available to first time buyers and homeowners looking to move.

The home you want to buy must be newly built with a price tag up to £600,000.

The scheme allows you to put down a smaller deposit with up to 20% of the cost covered by a shared equity loan.

Example:

Property Purchase price – £200,000

Your cash deposit – £10,000 (5%)

Shared Equity Loan – £40,000 (20%)

Your Mortgage – £150,000 (75%)

What does it cost?

• You are not charged fees for the first 5 years of owning your home
• There is no interest to pay on the loan for the first 5 years – after that you pay a fee of 1.75% of the loan’s value. This increases by RPS (Retail Price Index) which is a measure of inflation plus 1%.
• Paying fees do not count towards paying back the loan amount.

What happens if you sell your house?

So the scheme requires you to pay back the loan or sell your house after 25 years. How much you pay back will depend on the market value of your house at that time.

Example:

Market Value                             Equity loan taken out                                     Amount

House bought for £200,000                         20%                                             Borrowed £40,000

Sold for £250,000                                       20%                                             Pay back £50,000

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Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.