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Buying a home in the UK for first time buyers has become increasing harder over the past 5-10 years with house prices rising. And although that hasn’t slowed down, there has been a 5k deposit mortgage scheme introucted in the UK.
In this blog, we’re going to cover everything, you, as a first-time buyer will need to understand before making this one of the biggest decisions of your life; your new home.
What is the 5k Deposit Mortgage?
The £5k deposit mortgage is designed to help first-time buyers get on the property ladder with a smaller deposit. In this case, buyers only need to contribute £5,000, which is typically much lower than the standard 10% or 20% deposits required for most traditional mortgages.
Here’s all the key information you need to know about the deposit scheme:
- You must provide at least a £5000 deposit (minimum)
- This offer is exclusive to first time buyers
- There is a max LTV (loan to value) of 99%
- The loan size can be between £95,001 and £495,000
- The max term has to be 40 years, and you can’t be above 70 when the term finishes
- The purchase price of the property has to be between £100,001 and £500,000
- You must have the right to reside in the UK
- Loans can be up to 4.49 times your annual income
How to Get a £5k Deposit Mortgage
To get a £5k deposit mortgage, you typically need to follow these steps:
First-time Buyer: These mortgages are often aimed at first-time buyers, so you need to confirm you meet that requirement.
Income Limits: Some schemes may have income caps or other criteria based on your financial situation, so check if you qualify.
Property Type: Certain schemes may only apply to specific types of properties
Government-backed schemes like Help to Buy or Shared Ownership, which may offer reduced deposit requirements. Some lenders might offer specific £5k deposit mortgages through these schemes.
Not all lenders offer £5k deposit mortgages, so research lenders who specialise in first-time buyer products like Bell Financial Solutions.
Make sure your credit score is healthy, as a higher credit score improves your chances of securing a mortgage with favourable terms, even with a lower deposit. If your credit score is low, you need to look at improving it before applying to get the best deal.
Lenders will assess your ability to repay the mortgage. They typically evaluate your monthly income, expenditure, and overall financial stability.
Use affordability calculators available on mortgage provider websites to check if you can afford the monthly repayments based on your income.
Lenders will require certain documents to assess your application. This can include proof of income, bank statements, and identification.
If you’re using a government scheme, you may need to provide additional documents, such as proof of eligibility.
A mortgage broker like Bell Financial Solutions can help you find the best £5k deposit mortgage deals. We have access to a wide range of lenders and can offer advice on the most suitable options for your situation.
Once you've done your research and confirmed your eligibility, it's time to apply for your mortgage. You can usually apply online or with the help of a mortgage advisor. For an instant quote, visit our mortgage quote calculator.
Compare all available offers to ensure you're getting the best terms. Check out our Best Buys mortgage comparison table for the most competitive rates.
Additional Fees - While the deposit may be low, remember that there are other costs involved in purchasing a home, such as stamp duty, valuation fees, legal fees, and possibly mortgage arrangement fees.
Monthly Repayments - Make sure you’re comfortable with the monthly repayments, especially if the interest rate is higher due to the smaller deposit.
Potential Risks of a £5K Mortgage
While a £5K deposit mortgage can make homeownership more accessible, there are some risks to consider:
Advantages of a £5K Deposit Mortgage
The £5K deposit mortgage offers several advantages, especially for first-time buyers looking to get on the property ladder with minimal upfront costs. Here are some benefits:
- Lower Deposit Requirements - The biggest advantage of a £5K mortgage is the reduced deposit requirement, making it easier for first-time buyers who may struggle to save for a larger deposit.
- Quicker Path to Homeownership - With a lower deposit, you can buy a home sooner than if you were saving for a larger deposit.
- Lower Initial Financial Burden - With only £5,000 required upfront, this mortgage can reduce the immediate financial strain, allowing buyers to focus on managing monthly repayments rather than a large lump-sum deposit.
- Head Start in a Rising Property Market - In a property market where house prices are increasing, a £5K mortgage allows you to act quickly and get on the housing ladder before prices rise further.
Can You Be a Joint Applicant?
Yes, you can be a joint applicant, as long as at least one person is a first-time home buyer and neither of the applicants has background properties that are owned in their name. This allows partners who may have a smaller deposit, but want to get on the property ladder, to do so.
Speak to an Expert Today!
Ready to take the next step towards homeownership with a £5K deposit mortgage? At Bell Financial Solutions, we can help you understand the process, compare mortgage options, and find the best deal for your needs. Get expert advice and personalised support today – contact us now to discuss your mortgage options and start your journey to owning your home!
Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.
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