While the extension of the stamp duty holiday to the end of June 2021 and then a tapering off period to September was the headline news in the March Budget, it wasn’t the only matter affecting the property market. The Chancellor also announced a small deposit mortgage guarantee.
Speaking to MPs, Rishi Sunak said; “Lenders who provide mortgages to homebuyers who can only afford a 5% deposit will benefit from a Government guarantee on those mortgages. I’m pleased to say that several of the country’s largest lenders including Lloyds, NatWest, Santander, Barclays, and HSBC will be offering these 95% mortgages from next month, and I know more, including Virgin Money will follow shortly after. A policy that gives people who can’t afford a big deposit the chance to buy their own home. As the Prime Minister has said, we want to turn generation rent into generation buy.”
Key points of the small deposit mortgage guarantee
Key points of the small deposit mortgage guarantee include:
- It is available to first-time buyers and existing homeowners
- It is available for properties priced up to £600,000
How to enhance your chances of applying for a small deposit mortgage?
With the small deposit mortgage guarantee giving hope to many buyers, you might be considering your options of securing a mortgage. This new scheme is very welcome, but there is still a lot that mortgage applicants can do to enhance their chances of success.
Review your credit score
Even with a 95% mortgage, the better your credit score the more likely you will receive an affordable mortgage offer.
Review your credit report through platforms such as Experian or Equifax. Checks for small deposit mortgages will likely be comprehensive, so you must present as strong a case as possible.
Be sure to pay your bills on time, don’t make other credit applications in the build-up to applying for the mortgage, and ensure all the details in your report are correct.
Also, if you are applying as a couple, both partners must consider their credit score. Many households have found their mortgage application is hampered as a couple because one of the parties’ credit scores is so poor. It might be that applying for a mortgage under one name is better for your chances.
However, this is something you should consider as a couple and discuss with a professional.
What can you afford to pay each month?
While the mortgage guarantee scheme allows you to pay a smaller deposit, you will likely need to make larger monthly payments. These higher fees could be an issue for some applicants, and you must know what you can afford to pay each month.
Take the time to draft a monthly budget, and allow yourself some leeway for unexpected costs and bills. At most points in life, the only expected thing is that unexpected bills will arise!
Consider if the pandemic has affected you?
Virtually every decision we make nowadays relates to the pandemic. Perhaps you are so keen to move because the lockdown periods convinced you that you need a larger home. However, you need to consider if the lockdown has affected your finances or your ability to pay a mortgage each month.
Lenders will scrutinise your finances and your employment stability. If they are not confident in your ability to maintain payments, they will not offer you an attractive mortgage. Therefore, it is in your best interest to feel as confident as possible and submit an application that demonstrates this confidence.
How to explore your small deposit mortgage options with The Money Hub
Call the Money Hub Limited on 0203 725 5830 and speak to one of our highly specialised and dedicated Mortgage Advisors or you can complete an enquiry form which will allow you to schedule a call time.
DISCLAIMER: These articles are for information only and should not be construed as advice. You should always seek advice prior to taking any action.