We recently heard from someone who did not think it was possible to get a mortgage with a 5% deposit. They did not believe they were around anymore and/or it was more of a gimmick by mortgage lenders after being declined by the only lender he could find.
So I think the first thing is just to debunk a few myths:
- 5% deposit mortgages are availbale. As we are whole of market we access to most of these deals, possibly all of them.
- They are harder to obtain. The risk is higher to the lender so they take more time checking the application and if it is a credit scoring lender the score required is probably higher.
- You do not need a perfect credit history but it probably helps (although I will go into this further below).
- They are not only available for new build homes.
What about if with bad credit?
There are a couple of lenders who will consider applicants with a 5% deposit and adverse. However those options are limited, they will come at a cost – although nothing too bad. But the bad credit they will accept might be a little restricted.
Getting a mortgage with bad credit and a 5% deposit is possible, but generally speaking we need there to have been a clear gap between the adverse. As an example if you went through a rough patch for whatever reason and built up a handful of Defaults, we would likely need a 3 year gap between the date of registration and your application.
If you have a single default for say a mobile phone bill, we might be able to find lenders who will be ok with it.
There are examples and times where we can help to overcome the adverse with a 5% deposit but as I say with any adverse the devil is in the detail.
Does it have to be a new build?
In a word, no. The products we do are available for more or less any property. We might struggle with things like new build flats or properties above commercial premises but I think it becomes a case of lets have a chat and a look at the property and we can normally have a good idea before we make an application if it i slikely to be accepted or not.
Is it harder to get a 5% deposit mortgage?
If you go to a credit scoring lender (basically the high street lenders) typically the score needed will be higher than a 75% mortgage. again, this is down to risk for the lender. They are very much cherry picking. when we talk about the score, we mean the score of your application not your credit score.
If we look at non credit scoring lenders, they are looking at your application as a whole and making a human decision on whether to lend or not.
In both cases, they are taking a risk at the LTV on the mortgage. They probably do not want someone with a gifted deposit who has only been in their job for a month. That is putting too many risk factors together. From that perspective it will be harder to get accepted. But as with the property, lets have a chat and discuss your circumstances.
Summary
In short, lets have a chat. Getting a 5% deposit mortgage is more difficult, but they are definitely available. Lets give you the best chance of acceptance and try to make it as simple as possible.
We can discuss your circumstances and see if you are likely to be accepted or not. We do this for all customers, not just those with 5% so this is nothing unusual.