What is a 95% Mortgage
Just as it sounds, with a 95% mortgage you only get a 95% mortgage and have to put down a 5% deposit. This means you will have a 95% LTV(Loan To Value). As with the 100% mortgages this mortgage product was very popular before the financial crisis but has decreased in demand.
First time buyers who meet the mortgage lenders affordability criteria for a 95% mortgage will be able to take one out.
To qualify for this mortgage you will need a good credit record and if not it might be worth taking steps to increase your credit file.
You will also need a good amount of regular income for lenders to consider you for this mortgage.Mortgage lenders will typically loan 4.5 times your income.
Advantages of the 95% mortgage
The advantages of the 95% mortgage is that the deposit requirement is low.
Disadvantages of the 95% mortgage
With a 95% mortgage you will barely own any equity in your property and if prices fall any more you will find yourself owing more on the mortgage than the property is worth.This will make it almost impossible for you to remortgage to any cheaper mortgages.
If interest rates rise you will also have higher monthly repayments if you are not on a fixed mortgage. This might also put the mortgage owed on the property higher than the property value.
95% Mortgages come with high arrangement fees and usually have high early repayment charges.