The Mortgage Guarantee Scheme

The mortgage guarantee scheme is a 95% loan to value (LTV) mortgage scheme to help buyers with a 5% deposit. Under the scheme, buyers can purchase a property priced up to £600,000 and it is open to everyone, not just those who are buying their first home and never had a mortgage before – as was the limitation for the Help to Buy Scheme. This means that the scheme will help both first-time buyers as well as those looking to move up the property ladder.

The good news is that this scheme has prompted lenders’ to offer high LTV mortgages independently of this scheme – opening up the property market to first time buyers once again.

There has been a high level of demand for homes since the property market re-opened last year due to pent up demand, the stamp duty holiday, low interest rates and a reassessment of buyer’s requirements. Last year buyers faced having to raise deposits of around 20% in order to secure a loan and this was against a backdrop of house prices increasing and, as a result, a substantial number of first time buyers have had to put their plans on hold. This scheme means that those with a small deposit can now realise their dream of getting onto the property ladder.

Although the new scheme is available through many of the large lenders including Barclays, Lloyds, HSBC and Santander, many others are offering high LTV mortgages so it’s worth getting financial advice to find out which mortgage product is right for you.

How the scheme works

The mortgage guarantee scheme means that the government will repay lenders some of their losses if the buyer defaults on their mortgage payments. In return for the guarantee, lenders will sell mortgages worth up to 95% of the property price.

The mortgage application for this scheme will be the same as applying for a standard mortgage – you will have to undertake affordability checks and show that you can afford the monthly repayments. With the existing Help to Buy scheme, the government would lend you 20% of the cost of your newly built home from an approved developer and would share in any increase in the value of the property. Find out more about this scheme. 

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