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Lenders return to low-deposit mortgages

How, where and when should I think about a 5 per cent deposit?

Major mortgage lenders are beginning to offer low-deposit mortgages again, many of them since the crash of 2008, the BBC has reported.

Mortgage deposits well above 5 per cent have been the norm for the years since the credit crunch bit hard on the market and subsequent tightening of mortgage lending regulations. But now building society Nationwide and bank Santander have just launched mortgage products with a 95 per cent loan-to-mortgage. This would require a borrower to produce a deposit of just £13,000 for a typical first home of around £260,000.

Advisers concede this is a sign of good health in the market for buyers with modest deposits.
Most mortgages of this kind have in recent years, required aid from the Government’s Help to Buy scheme but according to reports, some new borrowers are doing their own thing without having to rely on HM Government for help.

Other lenders are almost certain to follow suit, but a 95% loan to value mortgage for a first time home buyer isn’t as rare as the headlines would make you believe. The Family Building Society’s innovative Family Mortgage, launched in July 2014, combines a 5 per cent deposit with the ability to utilise a family’s assets, such as savings or investments, to act as additional security against the mortgage, thus helping to keep repayments down.  While this arrangement may involve a commitment by the family member for up to 10 years, it does provide a viable alternative for first time home buyers who want to ‘keep it in the family’.

But no matter which scheme is right for you, the important thing always comes down to affordability. So remember:

• Always stay within your budget and don’t overstretch your finances.
• Make sure it is the right product for you.
• Is it portable if you move house?
• Will the fees – not only mortgage arrangement but legal as well - add significantly to the loan?

In a low interest rate environment it is hard to work out when interest rates will change so ask:

• Is it available as a fixed-rate mortgage so that I know what my repayments will be for that period and if so, what are the penalties for early redemption?

As always, it is better to seek advice where it is available. Click here for more information or to speak to one of Family Building Society’s friendly and highly trained advisers.

Your home may be repossessed if you do not keep up repayments on your mortgage

Steve McDowell

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Family Building Society
Ebbisham House
30 Church Street
Surrey KT17 4NL
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