The 95% Mortgage Guarantee Scheme was initially launched in 2021 to encourage lenders to bring high loan-to-value mortgages back to market following the pandemic. These products allow buyers with a deposit of as little as 5% to purchase a home, so the scheme may be helpful if you’re struggling to save a large deposit. Over 41,000 people in the UK have already benefitted from the 95% Mortgage Guarantee Scheme and it will continue to be available until at least mid-2025 in its current form. In this guide, we’ll explain everything you need to know about the 95% Mortgage Guarantee Scheme, including how it works, who’s eligible, the benefits and drawbacks, and whether it’s the right choice for you or not.
What is a 95% Mortgage?
A 95% mortgage is a mortgage that accounts for 95% of the value of a property, which means the loan-to-value is 95%. In other words, buyers using a 95% mortgage will only need to save a 5% deposit.
What is the 95% Mortgage Guarantee Scheme?
The 95% Mortgage Guarantee Scheme is a Government-backed scheme that allows mortgage lenders in the UK to offer 95% mortgages without bearing the full risk of these high loan-to-value (LTV) products. The scheme is designed to give people who have a smaller deposit the chance to buy a home. Not all lenders in the UK take part in the scheme, but there are plenty of options, including from several of the UK’s biggest mortgage providers
How Does the 95% Mortgage Guarantee Scheme Work?
95% loan-to-value mortgages present a high risk to lenders, which is why they all but disappeared during the pandemic when the housing market took a hit. To revive this important option for buyers who can’t afford to save a larger deposit, the Government committed to guaranteeing part of these loans to encourage lenders to bring them back to market. If the borrower is unable to keep up with mortgage repayments and the property is repossessed, the Government will cover some of the cost if the lender loses money. It’s important to note that this guarantee is to the lender, not to the borrower. To you as the borrower, this is a regular 95% LTV mortgage, so you will have to keep up with your repayments otherwise your home could be repossessed.
Who’s Eligible for the 95% Mortgage Guarantee Scheme?
The 95% Mortgage Guarantee Scheme is for any home buyer in the UK over the age of 18 who is buying their main residential home. This includes First Time Buyers, previous homeowners, and people moving house. You’ll need to save between a 5% and 9% deposit and then secure a repayment mortgage for the remaining 91% to 95% by passing the lender’s affordability and credit checks. The property can’t be worth more than £600,000 and it can’t be a new-build property.
To be eligible for the 95% Mortgage Guarantee Scheme you must:
- be 18 or over
- be purchasing a home in the UK to live in as your primary residence
- be purchasing a property worth up to £600,000
- be purchasing a property that is NOT a new-build
- have a deposit of between 5% and 9%
- pass the lender’s affordability and credit checks to secure a 91% to 95% repayment mortgage
What Are the Benefits and Drawbacks of the 95% Mortgage Guarantee Scheme?
Benefits of the 95% Mortgage Guarantee Scheme
- It gives buyers who can only afford to save a 5% to 9% deposit the possibility of buying a home.
Drawbacks of the 95% Mortgage Guarantee Scheme
- Having a such high loan-to-value could put you at risk of going into negative equity if the property market were to fall.
- Depending on the cost of your property, you may have to borrow a sizable sum, meaning your repayments could be high.
- These mortgages tend to come with relatively high interest rates compared to mortgages with lower LTVs.
Is the 95% Mortgage Guarantee Scheme Right For Me?
If you’re struggling to save more than a 5% to 9% deposit and you want to buy your home soon, the 95% Mortgage Guarantee Scheme could help you do this. Just be aware that you will likely have to accept a relatively high interest rate.
If your deposit is looking like it’ll be in the higher range of 8%-9% and you’re in no rush to buy, you may want to consider saving a bit more and putting down at least a 10% deposit so you can access lower rates. This would give you a 90% LTV mortgage that would fall outside of this scheme, but it could reduce the amount of interest you’ll need to pay.
If you’d also like to have the option of buying a new build property with a 5% to 9% deposit, you may be able to do so using the Deposit Unlock Scheme.
How Do I Apply for the 95% Mortgage Guarantee Scheme?
Applying for the 95% Mortgage Guarantee Scheme is no different to applying for a regular mortgage. The first step is to speak to one of our friendly advisors. We have access to a wide range of lenders, including specialist lenders and exclusive deals that are only available through brokers like us. This means we’ll be able to tell you what deals are available to you from across the market, so you can compare mortgage rates and see which lender is most suited to your needs. We’ll only recommend products you’re likely to be accepted for because being rejected for a mortgage can damage your credit score. Once you’re happy, we can apply on your behalf and liaise with your lender, estate agent and solicitor to push the process along for you. We can also arrange a Mortgage in Principle so you can start putting strong offers down whilst your main application is being processed.
What Other Help to Buy Schemes Should I Consider?
There are other schemes available to help you get on the property ladder or purchase a new home that suits your needs. We’ll briefly look at these below, but please click the links to see the full guides for each one.
Shared Ownership Scheme
This scheme allows you to buy a share of a home and rent the remaining share. You can then work towards full ownership over time. For the share you do own, you’ll need to put down at least a 5% to 10% deposit and then qualify for a repayment mortgage for the remainder. To learn more about this scheme, please read our guide, ‘Shared Ownership Scheme Explained’.
Deposit Unlock Scheme This scheme is similar to the 95% Mortgage Guarantee Scheme in that it offers 95% LTV mortgages so you can purchase a home with only a 5% to 9% deposit. The main difference is that it is only for new build properties from participating home builders. To learn more about this scheme, please read our guide, ‘Deposit Unlock Scheme Explained‘.
The Bottom Line
The 95% Mortgage Guarantee Scheme allows First Time Buyers, previous homeowners, and people moving house the opportunity to get a mortgage with just a 5% to 9% deposit. The property can’t be a new build, and you’ll have to qualify for a repayment mortgage of 91% to 95% to use the scheme. Lenders are able to offer these high LTV mortgages because the Government guarantees a part of the loan to reduce the risk. However, this protection doesn’t extend to you as the borrower, so you’ll need to keep up with repayments or your home may be repossessed. To see if you’re eligible for a mortgage using this scheme and to find out what rates are available to you, please book a chat with one of our friendly advisors. We’ll only recommend for mortgages you’re likely to be accepted for to protect your credit score.
At Michael Usher Mortgage Services, we’ve been helping our local community for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The precise amount will depend on your circumstances but will be agreed with you before proceeding.
