5 Percent Deposit Mortgage Scotland
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5 Percent Deposit Mortgage Scotland
Graeme Hilley and Ross Bremner talk to us about 5% deposits in Scotland.
Can you get a mortgage in Scotland with a 5% deposit?
Absolutely. The majority of lenders will offer mortgages with a 5% deposit – including the main high street lenders that everybody will recognise, and also specialist lenders.
A 5% deposit mortgage can be ideal for clients who are restricted with deposit, whether they’re First Time Buyers or home movers. That’s based on the home report value of the property, which is worth bearing in mind. But a 5% deposit could be enough for a lot of people to make their property dreams come true.
Is it easier to get a mortgage in Scotland with a 5% deposit?
No, it should just be the same as in England. There’s no difference in lender criteria in either country. One thing I would say is that in Scotland, we benefit from lower overall purchase prices than in England.
Typically a 5% deposit could get you a bit more in terms of property value than it might in England. But other than that, there’s no difference.
How can you get a mortgage in Scotland with a 5% deposit? What’s the process?
You’d want to speak to a mortgage broker who has access to all the lenders. We have different sourcing systems that link us up to all the major providers, with real-time updates on products available with a 5% deposit.
In regard to the process, have your documents ready: pay slips, bank statements et cetera. That would enable us to get you a Mortgage in Principle and submit an application based on a 5% deposit, depending on which lender has the best deal for you at that time.
What government schemes are available in Scotland when acquiring a mortgage with a 5% deposit?
The government has been running the Mortgage Guarantee Scheme, which sits behind a lot of the 95% lending in the UK – but that doesn’t really have any impact on clients. It’s not a specialist mortgage product per se.
We did have the Lift scheme in Scotland, which started in April 2024, however this scheme is now fully funded for the year, so there’s not any lending available under that – but potentially there will be next year [podcast recorded in October 2024].
Which lenders provide 5% deposit mortgages in Scotland? Are there many?
If you look at the major UK lenders, such as Virgin Money, Lloyds Banking Group, Royal Bank of Scotland, Nationwide, Santander, HSBC, Barclays… Most people have some sort of financial association with those institutions.
All those lenders offer mortgages with a 5% deposit in Scotland, so there are lots of options available.
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How do I qualify for a 5% deposit mortgage?
Reach out to us for a chat and we’ll see if that will fit for you. Generally, 95% lending does require a little bit more credit assessment and more limited borrowing. Naturally when you’re putting down less deposit, it’s a slightly higher risk for the lender.
Credit assessments can be slightly more tricky than if you’re putting down 10%, for example, and the income multiples lenders might offer you could be reduced. The answer is to speak to a broker. As we touched on in previous podcasts, the best thing to do is get you an Agreement in Principle so that you can understand your options.
An Agreement in Principle lets you understand how much you can borrow and how much your monthly payments are – but also, crucially, how much deposit you need based on your credit profile. So get in touch and we can answer that question for you.
What are the benefits of 5% deposits for First Time Buyers and home movers?
In Scotland, we’ve got the Home Report valuation system, so if a property is valued at £100,000 with a Home Report, but you have to pay £105,000 to secure the property, you will need a larger deposit.
If you’ve got a £10,000 deposit, being able to get a 5% mortgage will mean you can still secure the property. A 5% deposit is £5,000, then the further £5,000 over and above the Home RReport gives you a £10,000 total deposit. Having that lower deposit threshold can really help.
It also allows people to have funds available for fees, solicitors or stamp duty. Perhaps the property needs some home improvements or renovations. Reducing the deposit you put down on the mortgage allows you to retain some funds to do some upgrades.
Again, lowering the deposit could mean you retain some savings as an emergency fund, etc. There are lots of benefits to a lower deposit mortgage. It just gives the client flexibility if required.
How does the 5% deposit Mortgage Guarantee Scheme work in Scotland?
The 95% mortgage operates like any standard mortgage. For you as a buyer, there’s no difference. There is an impact in the background for the lender, but for a client, there’s no difference in 95% lending under that scheme and 95% lending outside that scheme.
What credit score is needed for a 5% deposit mortgage?
When lenders assess mortgage applications, they’re assessing risk. A 5% deposit presents the highest risk to lenders, because the money submitted by the applicant is at the lowest level.
If there are any issues in the future and that property needs to be repossessed, there’s a high probability that the lender won’t get all their funds back.
On that basis, your credit score needs to be fairly strong to secure a 5% deposit mortgage. All lenders assess applications differently and have their own approach to credit score based on a 5% deposit.
In general, being on the voters’ roll is really important, and if you have any credit commitments, make sure you’ve not missed any payments on those. Those things will aid you to secure a mortgage with a 5% deposit.
If there are any issues or historical challenges on your credit report, it could reduce your options. Again, that’s why you should speak to a mortgage broker – because where one lender might say no, another might say yes.
Clean credit is more important with a 5% deposit than a 10%, 15% or 25% deposit. Again, it just depends on your individual circumstances, so speak to a mortgage broker.
What else do we need to know about 5% deposit mortgages in Scotland?
Lots of things can influence your ability to get a mortgage at 95% and it’s our job to understand those. If it’s potentially not available to you immediately, we will assist and guide you on how to get there.
Speak to a broker to establish what position you’re in. We’ll be delighted to advise anybody, so get in touch and we’ll see what we can do for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.