There are a lot of different kinds of mortgages, but one that can be the best for anybody who is having a hard time saving up money for a deposit are 95% mortgages. They were made to help these people – and if you are struggling to save up for a down payment (also known as deposit), then it would be a good idea to learn more about these kinds of mortgages.
What are 95% mortgages? And how can they help you with your deposit? This article has the answers to your questions and the information you need on this type of mortgage.
How do 95% mortgages work?
If you want to know how they can help you, then you need to know how they work.
This kind of mortgage is perfect for people who can only afford to put down a 5% deposit, which is the lowest most lenders will accept. With a deposit this low, you may be at risk of falling into negative equity if property prices drop. Did you know that they only need to drop 6% for your property to become worth less than your mortgage?
This is pretty bad and because of this risk, most lenders will charge a high mortgage rate. 95% mortgages may have a higher interest rate, but the higher interest reduces this risk.
Should I get a 95% mortgage?
A good question is whether or not you want to get a 95% mortgage. If you can’t get a higher deposit than 5%, then this kind of mortgage will really help you out. However, if you’re worried about paying the extra interest, then maybe you could find another way to get the money you need.
A low deposit is always a bad thing, so make sure that whatever you do, you put down the most amount of money for the down payment as possible. The higher the deposit, the better your mortgage will be. You’ll get a lower interest rate, and you’ll have an easier time through your mortgage, too.
But if you can’t get any extra money for your down payment, then you may need to get a 95% mortgage. Just remember that they are good for people who are struggling to save a deposit – and that many borrowers who do have trouble saving get these kinds of mortgages to help them out.