"The Mortgage Guarantee Scheme, also known as the ‘Mortgage Guarantee Program’, is designed to help first-time buyers who may struggle to secure a mortgage due to having a low deposit. Instead of the standard 10-20% deposit, buyers may be able to access mortgage financing with a deposit as low as 5%"
- Pete Mugleston - Online Mortgage Advisor
Mortgage schemes play a crucial role in facilitating access to homeownership for individuals who may otherwise struggle to afford a property outright. These schemes aim to provide pathways for a broader range of individuals to enter the property market by helping with discounts, down payments, and lending criteria.
With the aid of mortgage brokers, these schemes are carefully matched to suit the buyers’ financial needs and goals and are an essential asset to have throughout the application process. Pete Mugleston, MD at Online Mortgage Advisor, has delved into the various mortgage schemes and how mortgage brokers help aspiring homeowners.
Shared Ownership
Shared Ownership schemes allow buyers to purchase a portion of a property (typically between 25% and 75%) and pay rent on the remaining share. This can reduce the upfront cost of buying a home, particularly in expensive housing markets. Also, if the buyer wishes to, they can increase their share of equity in the property, right up to 100%.
It’s important for buyers to note that only certain mortgage providers offer Shared Ownership schemes, and it’s absolutely important they also consider all potential additional fees.
Right to Buy
Right to Buy is a government mortgage scheme which allows most council tenants and some housing association tenants to buy the property they live in at a discount, sometimes without a deposit as many providers allow borrowers to put their discount towards their purchase. The primary aim of the scheme is to enable tenants to become homeowners.
This scheme adopts the primary aim of enabling tenants to become homeowners. The mortgage application will undergo standard affordability checks, and the discount which the buyer will receive may fluctuate depending on factors such as property type, location, and value. Typically, the longer the individual/s has been a council tenant, the greater the discount they may qualify for.
Additionally, the lender will assess the buyer’s affordability and eligibility based on factors like income and credit rating. If the buyer has bad credit, is retired, self-employed or the property has non-standard construction (such as thatched roofs or timber frames), they may need to seek assistance from a specialist lender.
The Mortgage Guarantee
The Mortgage Guarantee Scheme, also known as the ‘Mortgage Guarantee Program’, is designed to help first-time buyers who may struggle to secure a mortgage due to having a low deposit. Instead of the standard 10-20% deposit, buyers may be able to access mortgage financing with a deposit as low as 5%.
The government has encouraged 95% loan-to-value by offering a ‘guarantee’ on a portion of any mortgage provided under it. This implies that they will assume some of the risk associated with the mortgage lender’s investment.
Help to Build: Equity Loan
The purpose of the Help to Build: Equity Loan is to make it easier for individuals and families to build their own homes by providing financial assistance and support, making building their own homes a realistic option, even with a small deposit. The equity loan amount can range from 5% to 20% (or up to 40% in London) of the total estimated cost. If qualified, an individual can allocate up to £600,000 for their new home. This budget must cover the land cost, if not already owned, and no more than £400,000 for construction expenses.
The £5k Deposit Mortgage
This scheme has been introduced by Yorkshire Building Society and is only targeted at first-time buyers, helping them secure mortgages with smaller deposits of just £5,000 to purchase a property valued up to £500,000.
With any potential mortgage scheme, we’d recommend first-time buyers gain expert advice from a mortgage broker throughout the application process to establish that they are borrowing within their means and accepting the best offer available to them for their situation.
