95% Mortgages are extremely attractive to First Time Buyers as it means they will only need to find a deposit equivalent to 5% of the purchase price.
You should be aware that lenders usually impose stricter lending criteria when assessing 95% mortgage applications and the rates tend to be higher than they would if you were to put down a larger deposit this is because you represent more of a risk to the lender.
What is a 95% Mortgage ?
A 95% mortgage is simply a loan which is equivalent to 95% of the purchase price.
A first time buyer bids £200,000 on a property and applies for a 95% mortgage, if their application is successful they will borrow £190,000 from the Bank and put down £10,000 as a deposit which is equivalent to 5% of the purchase price.
The ratio of loan to deposit is often referred to as LTV.
Is a 95% Mortgage the right choice ?
Before this question can be answered correctly you should have your financial situation fully assessed by a qualified Mortgage Adviser.
If struggling to save a sizeable deposit is your biggest obstacle it may be your only option however you are unlikely to secure one of the better deals available on the market as you represent a greater risk to the lender.
You should also be aware that there are lots of different hidden costs associated with buying a home which you may have failed to consider so even though you have saved up more than the 5% required you may still need some of this cash to cover other expenses such as solicitor fees, furnishings or stamp duty.
Check out the associated costs of buying a home.
Where can you get a 95% mortgage in Northern Ireland ?
Our Mortgage Advisers use the latest software to search through a comprehensive list of lenders to find the most suitable 95% mortgage available to you.
Each lender uses their own unique criteria when dealing with 95% mortgage applications, for this reason it’s important to contact a mortgage adviser who will instinctively know who is most likely to accept your application.
After the mortgage market crash in 2007 lenders became extremely cautious and 95% mortgage where extremely hard to come by. The market has eased significantly since then and now our mortgage advisers have access to dozens of 95% mortgages every day.
Lending Criteria for 95% Mortgages ?
The lending criteria surrounding 95% mortgages tends to be reasonably strict due to the increased risk that they represent.
Lending criteria varies from one lender to the next but some of the main factors that will effect your application will include.
- Income and expenditure – After assessing your Bank statements and payslips it should be clear that the mortgage product in question is affordable to you.
- Credit Report – Repeated failure to keep up with repayments will result in your application being rejected. Some lenders will allow 1 or 2 late payments on credit cards and loans and some will not allow any.
The Downside of a 95% Mortgage !
If house prices were to fall the 5% equity provided by your deposit does not leave you with a great safety net. If you were to find yourself in negative equity it would be difficult to re-mortgage for a better rate once your initial deal expired and you were moved onto your current lenders SVR ( standard variable rate ) this will leave you paying more than you could be if you had put down a greater deposit.