5% Deposit Mortgages
LTV is the ratio of assets to loan and allows your lender to assess how much loan you require in relation to the size of your deposit and the overall value of your property. For example, if your home is worth £100,000 and you have a deposit of 5% (£5,000), this means that your LTV on your mortgage is 95% and you will need to borrow £95,000 from your mortgage lender.
To qualify for a 5% deposit mortgage, you will be expected to meet certain criteria established by the mortgage lender. Lenders will assess your personal circumstances before offering you a LTV mortgage. The following things may be taken into consideration by your lender when assessing your circumstances:
- Your credit history – any previous loans, credit card debts, CCJs, outstanding overdrafts are taken into consideration.
- You income – whether you will be able to keep up with the monthly repayments as well as interest (this depends on which method of repayment you choose).
- Whether you have any previous late mortgage repayments.
- The amount of money you are looking to borrow in relation to the value of your property (LTV).
Although finding a mortgage with a 5% deposit may be fairly difficult, there are some options that you could consider that could enable you to do so. As banks and building societies acknowledge the struggle to find a suitable mortgage with a relatively small deposit, they are beginning to offer mortgage deals such as the following:
- Certain banks and building societies could offer mortgages with up to 95% loan to value (LTV) providing you opened a savings account with them and made regular payments for a certain period
- There are a number of lenders that offer mortgages with over a 90% LTV providing you have a relative with a sufficient income that would be willing to act as a guarantor for your mortgage.
Alternatively, you may wish to consider the following options:
- Sharing a mortgage with a relative, partner or friend could help you to share the costs of a mortgage, including the deposit
- There may be a government scheme in your area that could help you to buy a property