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Mortgage Guarantee Scheme

The Mortgage Guarantee Scheme can help you get on the property ladder.

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What is the Mortgage Guarantee Scheme?

The Mortgage Guarantee Scheme is a government-backed initiative that enables borrowers to take out a mortgage with just a 5% deposit.

The scheme is accessible to both first time buyers and home movers, making it a great scheme to help your mortgage affordability.

The scheme has helped 1000s of people become homeowners after being launched in January 2021.

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How does the Mortgage Guarantee Scheme work?

First of all, you need a 5% deposit on the property that you’re looking to purchase. Your 5% deposit is worked out through the price of the property that you are looking to buy. For example, a property worth £200,000 would require a £10,000 deposit.

If you have your 5% deposit you can then apply for the scheme via your bank or mortgage broker.

A mortgage broker does not just have access to their in-house products, they can access 1000s of deals to try and find a 95% LTV product that saves you money.

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Mortgage Guarantee Scheme Eligibility

To qualify for the Mortgage Guarantee Scheme, you must meet a set of strict requirements:

  • The scheme is open to both first time buyers and existing homeowners looking to move.
  • The property you intend to purchase must not exceed £600,000. This applies to both new builds and existing properties.
  • You must provide a deposit of at least 5% but less than 20% of the property’s purchase price.
  • The property must be a residential home in the UK. Buy to let properties and second homes are not eligible under this scheme.
  • Only repayment mortgages are eligible.
  • You must pass the lender’s credit check criteria.

For more information on your eligibility, please get in touch with our mortgage advisors.

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Mortgage Guarantee Scheme FAQs

How to apply for government Mortgage Guarantee Scheme?

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Applying for the Mortgage Guarantee Scheme is a straightforward process. Here’s a step-by-step guide to how you can start your application process:

  1. Check Eligibility – Make sure that you match the scheme’s criteria. The property must be valued less than £600,000 or less, you need at least a 5% deposit, the property must be a residential home in the UK, you must be taking out a repayment mortgage, the property must be your main home of residence and you need to pass lender credit checks and affordability assessments.
  2. Finding the Right Lender – Not every lender will be able to help you with the Mortgage Guarantee Scheme. Using a mortgage broker allows you to sit back and relax whilst they find a product that is tailored to your personal and financial situation.
  3. Prepare Your Application – Once your mortgage broker picks out the perfect deal for you, it is time to move on to preparing your Mortgage Guarantee Scheme application. Here we will need proof of identity, proof of address, proof of income, and a copy of your credit report.
  4. Submit Your Application – Once everything is ready to send off, we can submit your Mortgage Guarantee Scheme application off to the mortgage lender. Whilst they carry out all of their checks, all that you need to do is wait for any updates!

Just like a traditional mortgage, the Mortgage Guarantee Scheme process can take anywhere from 3-9 months to complete. Using a mortgage broker may significantly speed up your process as we handle all of the paperwork for you, allowing you to have a stress-free process.

How much can I borrow with the Mortgage Guarantee Scheme?

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The Mortgage Guarantee Scheme allows you to borrow 95% of the value of the property.

The way that this works is that you will take out a 95% LTV mortgage, after providing your 5% deposit.

You still need to find a mortgage product that matches the property you’re looking to buy. Using a mortgage broker could potentially help you save money on your mortgage repayments.

How does the Mortgage Guarantee Scheme help?

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The Mortgage Guarantee Scheme help you achieve homeownership much quicker.

Sometimes, saving for that 10% deposit mark can be very difficult. With the Mortgage Guarantee Scheme now on offer, achieving your dreams of buying a new property becomes a lot more realistic.

Is a 5% mortgage hard to get?

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With the Mortgage Guarantee Scheme, you may be eligible for a mortgage with a 5% deposit via a 95% LTV mortgage.

You must first qualify for the Mortgage Guarantee Scheme before you can get a mortgage with a 5% deposit. Therefore, it is important to look at the scheme’s criteria before applying.

If you’re looking for Mortgage Guarantee Scheme mortgage advice, speak with one of our mortgage advisors and book your free appointment today.

Are there other schemes to help me get a mortgage?

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Yes, the government offer a variety of schemes for both first time buyers and existing homeowners to help them buy a new property.

Other government schemes include Shared Ownership, Forces Help to Buy, Lifetime ISA and Right to Buy.

  • Shared Ownership – The Shared Ownership scheme allows borrowers to buy a share of a property and pay rent on the remaining share. Usually, borrowers take an initial share of 10%-50% out in the property. When it becomes more affordable, some homeowners up their share in the property and sometimes get the chance to have 100% ownership.
  • Forces Help to Buy – The Forces Help to Buy scheme is a government initiative designed to assist current and former members of the armed forces in purchasing a property. The scheme allows servicemen and servicewomen to borrow up to 50% of their salary, interest-free, to use as their deposit.
  • Lifetime ISA – The Lifetime ISA is a savings account that helps you save for your mortgage. The way this initiative works is that you add savings to your account and the government top up your savings by 25%. With savings capped at £4,000 per year, the maximum you can earn is £1,000 (25%) towards your deposit. This still leaves you with £5,000 in your Lifetime ISA, which can be used towards your mortgage deposit.
  • Right to BuyRight to Buy can enable you to purchase your council house, possibly without a deposit. This scheme comes with strict lending criteria, so speaking with a mortgage advisor is highly recommended.

If you want to learn more about these government-backed schemes and the Mortgage Guarantee Scheme, feel free to get in touch with our mortgage advisors.

Getting mortgage advice has never been easier, simply boo your free mortgage appointment online today.

How do mortgage lenders benefit from the Mortgage Guarantee Scheme?

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The scheme gives lenders the opportunity to purchase a guarantee on the mortgage, meaning that they are able to make their money back in the event of repossession.

The guarantee covers up to 80% of the purchase value of the guaranteed property, addressing 95% of the net losses within this portion. Consequently, the lender remains responsible for 5% of the losses covered by the guarantee.

This arrangement ensures that the lender retains a stake in every loan, maintaining a degree of risk and encouraging prudent lending practices.


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