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Pros and Cons 95 Percent Mortgage Products

95 percent mortgage products have given would-be first time buyers some of hope of eventually getting onto the property ladder. In June 2009, only six 95 percent mortgage products were available which has now risen to 31 available products and a further 244 90 percent mortgage products. So if you're looking to buy your first home but simply don't have a large deposit to put down, then this is certainly the best choice for you.

A 95 percent mortgage is basically taking out a loan to cover 95 percent of the home's value - so you're only putting down a 5 percent deposit. Of course, this comes with a few pros and cons.

 

Pros

  • First time buyers can easily jump on the property ladder with a smaller deposit to pay.
  • Buyers with significantly less income, or who cannot save for a deposit, also have a higher chance of buying a home.
  • Criteria for these mortgages are dedicated to ensuring buyers don't overstretch themselves and can meet their monthly repayments, so you don't have to worry about being caught in a enticing 5 percent deposit trap.

 

Cons

  • The rates for 95 percent mortgage products are considerably higher than normal mortgage products. Even though certain rules are set in place to stop buyers overstretching their income, the general interest rate can be a lot higher.
  • Monthly repayments periods will be longer and more expensive as the deposit normally takes a large amount off the overall loan for normal mortgage products.
  • Application fees can be higher than other mortgage products or the general criteria for applying can make it difficult for people with adverse credit to obtain a 95 percent mortgage.

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