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Original poster

Is a 95% mortgage a bad idea?

44 replies

CaseyBarn · 19/06/2022 18:47

So…been renting for 10 yrs.
Did own a property but ex secretly got a loan against the house so when we split, there was nothing left. Now remarried but both had had bad break ups where we lost our houses and had no deposit to buy one so had to rent.
DH was left in considerable debt by his exW and that got paid off last year (she moved back to Canada and never got in trouble for taking loans in his name!)
We have managed to save 10k so far which is only 5% of local average house price.
The 95% mortgage scheme ends in December, do we buy this year with a 95% mortgage OR spend another 2 years saving for 10% to get a 90% mortgage.

worth knowing we are both in our 40s so worry time will make us ineligible for any mortgage!

TIA

OP posts:
PritiPatelsMaker · 19/06/2022 18:49

Suppose it depends on the interest rate.

95% mortgages were the norm not so many years ago.

kerosene20 · 19/06/2022 18:52

I
would buy ASAP in your position and have not long taken out a 95% mortgage. It’s a first step on the ladder. Who knows if you’ll get a mortgage in 2 years? God forbid one of you is ill or unemployed.

Galliano · 19/06/2022 19:07

Depends whether your mortgage repayments will be more or less than your rent. If less the case to buy is more compelling. Also how recession proof is the area you live in? I know this is impossible to answer with certainty but I’d at least consider what happened in the last recession.

CheshireCats · 19/06/2022 19:13

Only 19 years ago, we got a 98% mortgage, having had the option of a 100% mortgage also.
Do it, I wouldn't leave it another 10years to save a bigger deposit- as you say, your ages then might mean a relatively short number of repayment years are offered, meaning large monthly repayments.

user1471538283 · 19/06/2022 19:16

Yes do it now! Then overpay as much as you can or save so when you switch you have a bigger deposit.

Having said that if the market return to pre covid prices you may want to wait?

windowout · 19/06/2022 19:16

I'd do it as long as you don't intend to move in the foreseeable future and I'd fix for as long as possible. It's always a risk but house buying always is.

ohCARP · 19/06/2022 19:16

We did a 95% mortgage in 2018. When we remortgaged this year our house value had increased and with our repayments our LTV is now 75% so it's worked out really well for us. I would say go for it.

blebbleb · 19/06/2022 19:19

I'd do it now. We got a 95% mortgage 3 years ago. Would never have been able to get on the housing market otherwise. As long as you can afford the repayments it's worth it. So glad we didn't wait to see if we could save anymore.

RedToothBrush · 19/06/2022 19:28

Ideally id say 90% max, especially atm as if house prices dip you will go into negative equity and be very trapped. Even at 90% you are high risk so id plan for a long haul home that is bomb proof in terms of location and your needs on the understanding that you need to be there for at least 10 years just in case.

But I wouldn't rule out a 95%. Its better than a 100%.

Nolongerteaching · 20/06/2022 00:43

I'm wondering th esame thing, OP.

I thought that the government deposit scheme for mortgages enabled ftb to secure a really good deal as the LTV was assured by them so the banks weren't taking any risks, therefore could give better deals.

(may have explained that badly) So, in addition to helping with the deposit, the scheme also helps get a better rate

Starseeking · 20/06/2022 11:36

In another 2 years, house prices could have moved on again, and you could still only have 5% deposit, but this time your ages will go against you so you'd have to repay over a shorter period.

In your position, I'd buy now if the option is there, as long as you plan to stay for a good few years (to mitigate the risk of potentially selling in negative equity).

GreenIsle · 20/06/2022 11:43

Op there will still be 95% mortgages available after this ends. This scheme was brought in during Covid to boost home sales and availability,

Whatsthestoryboringglory · 20/06/2022 11:47

I bought about 6 years ago with a 95% mortgage. As long as you are happy you can afford the repayments I’d say go for it.

Sorrynotsorry2 · 20/06/2022 11:49

I bought my house with a 95% mortgage. We did have to do a 2 year fixed rate at a higher interest rate. But after the 2 years we were able to remortage at a lower interest rate and had a 5 year fixed rate mortgage. We still paid the same amount monthly but due to a lower interest rate . It brought the mortgage down by 6 years.

I would see a mortgage broker and see what they can do for you.

Chewbecca · 20/06/2022 11:50

My first mortgage was 95%, it wasn’t a problem, I have moved multiple times since then and am now mortgage free 30 years on :-)

myuterusistryingtokillme · 20/06/2022 12:03

We did 95% and once we were in we started overpaying the mortgage (rather than waiting to get to 10% deposit and risk being priced out)

Just make sure that the property could be a long term solution for your family, and you have an appropriate fix on your mortgage rate, and you'll be able to ride out any short term negative equity

Calmdown14 · 20/06/2022 12:06

I'd do it as soon as possible. Mortgage lending criteria is likely to get tougher and interest rates are likely to go up so the 90 per cent may cost as much as 95 now.

The downside is obviously the risk of negative equity but if your repayments are less or similar to your rent and you've been able to save you could consider making a small overpayment each month to up your LTV by time you come to remortgage.

I'd try and fix for at least five years as you may find 90 per cent plus LTV products harder to come by so get into a decent bracket before going through the loops again

WashMeThroughly · 20/06/2022 12:08

Absolutely do it now!

WeLoveYouMissHanigan · 20/06/2022 12:10

IMO 95% is high risk for you

can you get something cheaper ?

user375242 · 20/06/2022 12:12

We did it last year, house has already gone up in value 10-15% so we should be in a lower LTV bracket when we can remortgage in 2 years.

HikerSpiker · 20/06/2022 12:16

Normally I wouldn't think it was a bad idea but I'd caution you to wait 6 months.

Reason being, house prices in Canada, NZ and Aus are all dropping. They started to raise interest rates before us. If the BoE raise interest rates again here, then we could be looking at house price drops in the next few months.

Canada's house prices have dropped by 9%.

Tessasanderson · 20/06/2022 12:21

95% tells me you are stretching to far in current climate. Have a read of "when will interest rates go down" thread.

Buy cheaper house if you need to get a foot on the housing ladder. Interest rates and cost of living crisis are going to make home ownership difficult for a lot of people. Go into it eyes wide open

blebbleb · 20/06/2022 12:22

I don't think house prices will drop here. I may be wrong though. There is a massive shortage here, and supply isn't meeting demand so they will stay inflated. I think about 800 new houses a day will need to be built to help with the shortage which isn't going to happen. We bought 3 years ago and I can't believe how much prices have gone up. It's ridiculous. I feel like weeping for the younger generation.

Lulubo1 · 20/06/2022 12:26

We just got our first house on a 95% mortgage. We would not have got on the housing ladder otherwise. We were saving up and during covid we watched houses increase in price so fast we have been priced out of our area. We have bought a house 2.5hrs drive away from where we currently live, it was the only way we could afford a house (just waiting for exchange and completion). I would highly recommend jumping on the ladder asap. With the interest rates rocketing, if you wait another two years, who knows where house prices will be or interest rates will be. We got a good deal, as we got our mortgage in April. The same mortgage costs £90 per month more if we were to get it now. (I'm not trying to scare you, I would recommend getting a 95% mortgage)

IcecreamForAlcohol · 20/06/2022 12:27

blebbleb · 20/06/2022 12:22

I don't think house prices will drop here. I may be wrong though. There is a massive shortage here, and supply isn't meeting demand so they will stay inflated. I think about 800 new houses a day will need to be built to help with the shortage which isn't going to happen. We bought 3 years ago and I can't believe how much prices have gone up. It's ridiculous. I feel like weeping for the younger generation.

If lenders tighten up lending criteria, where do you think the money to buy these properties will come from?