the new 5% deposit

GemmaPowell

Hello,

Was wondering if I could take some advice off you clever money people!

I have seen this new 5% deposit government scheme all over the news today.

Well my question is, where is this 'other' 5% coming from and do you have to give back that 5% over time?

What are yours views?

My reasons being are, my offer has been accepted on a house today :j and we heard all about this deposit on the news.

Many Thanks

betmunch

what "other 5%"

its a 95% LTV mortgage, you only put in 5%

GemmaPowell

I read about the builders & government putting in the other 5% to help, is in time would you have to pay this back?

betmunch

Nope, you put in 5%, you get a mortgage for 95%

behind the scenes the builder will pay the lender 3.5% of the purchase price and the government will pay then 5.5% of the purchase price which the lenders use to guarentee they dont lose out if you are repossessed, but that not something you have to worry about if you make all your payments

poppy10_2

GemmaPowell wrote: »

I read about the builders & government putting in the other 5% to help, is in time would you have to pay this back?

No, you put in 5% and get a 95% mortgage from the bank. What happens is the government and the housebuilder put some money aside as a contingency - if/when you get repossessed and are in negative equity, this money will be used to make sure the bank gets all its money back. It's of no advantage to you as a consumer.

VortexSteve

betmunch wrote: »

Nope, you put in 5%, you get a mortgage for 95%

behind the scenes the builder will pay the lender 3.5% of the purchase price and the government will pay then 5.5% of the purchase price which the lenders use to guarentee they dont lose out if you are repossessed, but that not something you have to worry about if you make all your payments

You're right in that the mortgage is just a 95% LTV mortgage so from a consumer perspective they don't need to worry about what else happens.

The builder pays their percentage into a pot set up for each builder and each lender via JLT (http://www.jltgroup.com) - the lender does not have direct access to the pot unless they need to call upon it to prevent loss after a repossession. The government part is just a guarantee, they're not actually putting money into an account somewhere or paying the lender for something which may never be required.

There is a cost to set up and manage the pot which is why not all house builders are on board from day one. The builder has to negotiate with each lender an agreement and then the pot can be set up.