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95% LTV mortgages as a second-time buyer

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Oct 20, 2022

95% LTV mortgage for second-time buyers

Since you’ve already made the jump onto the property ladder in the past, being a second-time buyer is usually much less stressful than the first time around, however, there are still a wide variety of factors to know about and consider when applying for a mortgage as a second-time buyer.

In this guide, we’ve provided a comprehensive rundown of 95% mortgages and what to expect as a second-time buyer applying for one, as well as lots more information about how to improve your chances of your application being successful.

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What is a 95% mortgage?

A 95% mortgage (also referred to as a 95% LTV mortgage) is a loan that will cover 95% of a home’s total value. The other 5% will come in the form of a deposit from the buyer.

So, if you have your eye on a property that is on the market for £200,000, your required deposit will be £10,000, while your mortgage will cover the remaining 95%, which is £190,000.

A 95% mortgage can make buying a home easier. As saving for a deposit is often one of the biggest obstacles for many second-time buyers, with a 95% mortgage, it can be much more manageable.

It can also help you be able to move much quicker than you otherwise might have been able to. With fewer savings needed, you don’t need to hang around for the pennies to pile up before you take the plunge and continue your way up the ladder as a second-time buyer.

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What is a second-time buyer?

If you have previously owned your own home, regardless of how it was purchased (e.g. mortgage or outright) and are buying another property, you are classed as a second-time buyer.

Whether or not you still own the property won’t make a difference to your status as a second-time buyer.


Is a 95% mortgage available for second-time buyers?

The good news is that 95% mortgages are an option for second-time buyers. However, mortgage options may be more limited than those buying their very first home. The reason for this is that many of these mortgages are offered exclusively to first-time buyers.

It’s important to remember that second-time buyers aren’t excluded; it simply means that it might take a bit more effort to get a 95% mortgage versus someone who is a first-time buyer. The 2021 Mortgage Guarantee Scheme is available to anyone, and those that are eligible can be approved with a deposit of as little as 5%.

There are also lenders available who have brought back 95% mortgages to be made available outwith of the scheme.

There are additional options open to you as a second-time buyer. These include guarantor mortgages, where a family member with a good credit history will provide mortgage repayments if you are unable to keep up with monthly payments on your 95% mortgage.

If you have a family member who would be willing to support you if the worst were to happen, a guarantor mortgage could help lower the risk posed by having a small deposit of 5%, as well as potentially open your application up to an increased number of lenders who will be more likely to consider your application.

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Eligibility for second-time buyers

While there are no direct requirements when it comes to a 95% mortgage, if you choose to use the mortgage guarantee scheme, there are a number of criteria you must meet in order to be eligible:

  • You cannot buy a home over £600,000
  • The property you intend to buy must be your sole residence
  • Companies cannot apply; only individuals


95% mortgages and bad credit

If you have bad credit, it could potentially make being accepted for a 95% mortgage more difficult. However, this largely depends on what type of bad credit you have. Similar to first-time buyers, having a deposit as little as 5%, coupled with bad credit, can mean mortgage deals may be limited.

In the eyes of many brokers, those with a low deposit and bad credit are viewed as a big financial risk. This is why it is so important to seek assistance from an experienced mortgage broker who understands that applicants are more than a bad credit score.

If you have bad credit, some lenders will turn your application down straight away, even if your credit concerns aren’t considered severe. With specialist lenders, however, they have much more flexibility and leeway to be able to take into account the reasons behind bad credit as well as the age and severity of it.


How easy is it to get an additional mortgage?

Although both the affordability and eligibility criteria for mortgages will likely be similar to when you bought your first home, because you’ve had a mortgage previously, it can, in theory, mean it’s easier to get a second.

One of the main reasons for this is that you will have a record of being able to show you can be trusted to pay back a mortgage loan each month on time. When first-time buyers get a mortgage, it’s not as clear-cut that they will be able to commit to the repayments, which always brings that bit more risk from the perspective of the lender.

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Top tips to get a 95% mortgage as a second-time buyer

If you’re ready to take the plunge and move to your second home, we have some handy advice that you should take prior to making your mortgage application.

Analyse your financial situation

A mortgage lender will do thorough research to get a full idea of your financial history as well as your current financial situation. They’ll also get a recent valuation of your current property as well as how much you owe on the mortgage for your first home.

It’s important to look at your own finances before applying for a mortgage to make sure that you will be able to safely afford the monthly repayments.

Mortgage lenders will be keen to understand any dents in your credit score or periods of time when any forms of payments were missed. It’s vital to recognise these episodes for yourself and to have an honest explanation of the reasons behind any financial difficulty.

Check your credit score for inconsistencies

As you’ve already had a mortgage, you’ve already done a lot to keep your credit file healthy. But checking your credit score will give you a solid idea of your current record and an idea of whether you are likely to be accepted for a second-time mortgage.

Many people are guilty of not checking their credit scores, and therefore, these mistakes are a permanent dent in their credit files. It’s not uncommon for there to be errors on credit files, and the sooner these are dealt with, the better. After all, you don’t want to run the risk of having a 95% mortgage application declined for a credit rating mistake that wasn’t your fault.

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What if I don’t have a 5% deposit?

In certain circumstances, it may be possible to borrow 100% of the purchase price of a home with no deposit needed. Although these types of mortgages were common in the past, mortgage lenders nowadays tend to view these as a very risky strategy.

Today, these types of mortgages are sold with far stricter conditions included.

Most people who are accepted for these types of mortgages are first-time buyers, and even then, there will usually be some degree of financial backing from family needed to make the application a success.


What if my finances change after I secure a 95% mortgage?

If you are unable to make a payment on time to your lender, it’s important to let them know as soon as possible.

Once they are made aware of your non-payment, they will usually grant you a grace period to pay the amount owed. Once this deadline has passed and payment has not been received, it will be marked on your credit file.

If you continue to have financial trouble and are finding it increasingly difficult to meet your payments, you should seek immediate financial advice. Failure to keep up with your mortgage repayments could mean your home could be at risk. Always be sure to keep your lender abreast of everything that is happening; honestly is always the best policy when it comes to your mortgage.

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Under the Mortgage Guarantee Scheme, what happens if I am unable to make my monthly mortgage payments?

Under the scheme, if you default on your monthly payments because you fall into financial hardship, the government will partially cover these payments so that the lender is less at risk.

Because the risk is less than it would be without the scheme, it means more and more lenders are willing to grant mortgages to a wide range of applicants.

Under the Mortgage Guarantee Scheme, can my mortgage be an interest-only mortgage?

No, any 95% mortgage offered under the scheme must be a repayment mortgage and not interest-only.

Are there any downsides to 95% mortgages?

A 95% mortgage is a great opportunity to use a small deposit to continue up the property ladder as a second-time buyer. But, as mortgage deals go, you could end up paying more over the long term with a 95% mortgage compared to other mortgages.

What is an equity loan?

Equity loans are similar to loans such as mortgages, which is why they are also known as second mortgages. The equity in the home will serve as collateral for the lender.


Loan Corp is here to help you get the best mortgage for you

Unless you are using the new Mortgage Guarantee Scheme, it can be challenging to find a 95% mortgage for second-time buyers.

However, it’s important to remember that this doesn’t exclude second-buyers altogether; it simply means that you need the right mortgage broker behind you to help you find the best mortgage to suit you. At Loan Corp, we take the hard work and stress out of finding the right mortgage, so if you are thinking about buying a new home, contact us today.

We work with over 200 lenders, so our friendly, professional and experienced team of mortgage brokers will always be able to point you in the right direction.

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