The number of 95 percent mortgages, i.e. where you borrow 95% or more of the property value, available today may not be significant but they are still available. We explain.
A wide range of different types of mortgages are available if you need a 95% loan to value deal.
Their suitability does tend to be more restricted than other types of mortgage deal, however, with many lenders extending them to existing borrowers or existing customers only.
That said, there are more 95% mortgages for first time buyers than you may have imagined, and also a greater choice of mortgage types at this loan to value than you might think.
95% mortgages for home movers are less available, especially if you want to change lender but it is worth researching your options as new deals are being offered all the time.
The range of 95% mortgage deals available includes fixed, discounted or tracker deals, as well as less popular arrangements such as offset mortgages. This means you do have a relatively broad choice about the type of deal you apply for.
However, you will need to take fees and charges into consideration when you're looking for the best deal as well as focusing on the rate of interest that applies.
At 95% ltv it is possible that you will need to pay a ‘higher lending charge’, which is a charge applied by the lender where a high proportion of the property value is borrowed. Remember to check for this and take it into your cost calculations.
While you need to pay significantly more per month for 5% deposit mortgages than would a borrower purchasing the same property with a 30% deposit, you should still shop around for a competitive deal so that you don't spend more than you have to on your home.
However, whether you're a first time buyer or homeowner looking to remortgage you need to consider that 95% ltv mortgages are secured loans and thus your home can be re-possessed by the lender should you default on your payments.
Hence you should only commit to a mortgage arrangement if you are totally confident you can afford the payments over the long-term: a typical mortgage term is 25 years.