Wednesday, May 6, 2020

A Close Look at The 95% Mortgages



Just look at it, everyone is chasing it. Only a yes from the lender and you get one of the most precious luxuries of the mortgage market. Yes, the hint is for the mortgage with 95% LTV. It is considered as a great success if you get the approval

for such a signif
icant amount, as it is not easy to convince the lender when it comes to applying for a property loan. 

It covers your property value conveniently, and you do not need to worry about the additional arrangements to bridge the financial gap between the 5% deposit amount and the loan amount you qualify for.

But don't you think before you desperately yearn for the mortgage, it is better to know about all the aspects? Have a look at the different related facets.

First, get friendly with the basic concept


Before you go further, have a quick look at the elemental nature of these mortgages. They facilitate funds equal to 95% of the purchase price or the property value, whichever is high.

Now the ESSENTIAL facts –


The introduction part is done, and now you can move on to the varied features of the 95% mortgages.

The interest rate choices


The mortgages are available with both the types of rate options - fixed rate as well as variable rate. In the latter one, most of the options are available with tracker rate and variable discount rate.

What, if your family or relatives want to help you?


There are several provisions for this too. Several options are there to let it happen.

  • They can pledge their savings as security
  • Can share the responsibility of the monthly mortgage repayments
  • Can offer to give some charge or payment on their property to make it act like a security

You calculate a 95% mortgage like this

With a simple calculation, you can calculate your LTV. Just a small game of numbers and price and you can do it. 



The rule is that you need to divide the loan amount (you want to borrow) by the property price or purchase price, whichever is high. Then multiply it with 100.

Here is an example –

You want to buy a property, and the price is £3,00,000

After deducting the deposit amount you need to borrow 2,85,000

Your LTV will be 2,85 000/3,00,000x100 , which tells that your LTV is 95%.

Higher monthly installments


You may take it as a significant advantage that you have received approval for 95% mortgage, and yes, it is good. 

However, there is always the other side of the coin. Yes, it is easier to cover the property value with this type of mortgage, but your monthly installment will be bigger than a mortgage product with a lower LTV.

Before you make or take a decision, do all the necessary calculations to adjust the upcoming mortgage installments in your monthly budget. Losing the trust of the lender in repayments can affect your financial future through a sharp fall in the credit score status.

Early repayment charges apply on loan with variable rates

If you have taken the loan on the variable rate and want to switch to the fixed rate option or wish to remortgage, it may not be possible to do it without paying an early repayment charge. 

The amount may not be minimal. This fact should always be in your mind when you apply for a 95% LTV mortgage.

Most of the borrowers are ignorant about it, and when they plan the switch, they get stunned. It is the reason that it is better to hire a broker to assist you. 

Broking companies have all the necessary information with the most profound detail. Don't worry. There are fee-free brokers available. They will not add to your burden of installments due to higher LTV, search for 'mortgage broker near me' and you will get the options like Shinemortgages.co.uk.

Factors that can get you the approval on 95% LTV mortgage

By working on several conditions, you can get approval on the mortgage.

  • You need an excellent credit score 
  • Your income status should be strong 
  • The debt-to-Income ratio should not be lower than 70:30 
  • Do not take any new loan 
  • Stay in the same job.

(According to the industry experts, you should have completed at least two years in the same company when you apply for a mortgage)

  • If possible try to create additional sources of income as they will help prove a strong repayment capacity
  • Your guarantor should be financially stable and there should be no high-interest debt in your financial records
  • Do not max out your credit cards 
  • Do not make multiple mortgage applications

If you thoroughly follow the above points, it is possible to get a 95% mortgage SMOOTHLY.

So...

The above basics about the 95% LTV mortgages prepare you to apply for the loans with less or no chances of rejection. Besides, the knowledge of the mortgage product is always beneficial for taking big decisions on property investment in the future. 

Author’s note – XYZ has strong knowledge about the mortgage industry and shares here some necessary facts. 95% LTV mortgages are quite popular in the mortgage industry, but how many of you know about them precisely and clearly? Here are the few essential points that should be in your knowledge.



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