Getting a 5% deposit mortgage before the scheme ends.

ChrisLV

Background: We’re looking to become first-time buyers soon. We’re currently tied to our rental property until July 2024 (by both the contract and our need to be close as close as possible to our son’s school, which he’ll finish in July). We’re looking at properties in the 180-200k range. We have a 5% deposit, but no realistic prospect of getting up to a 10% deposit by the time we buy.

Question: The 5% deposit scheme for first time buyers is set to end in December, which is an awkward 8 months before our intended move date. What do we have to have done by the end of the 5% scheme in December? Do we just need to have applied for a mortgage in principle? Do we need to have had an offer accepted on a property and applied for a mortgage proper? Do we actually have to have completed by then?

Of course, it is possible to negotiate with the landlord to leave the contract early and accept that we’ll have to a very long school run each day so that we can buy well before July 2024. But I’d like to get my head around timing options before going that route.

 

PS Am I being naive in thinking that the 5% scheme will actually end in December? Is it much more likely to be extended or replaced by a similar scheme?

MattMattMattUK

You need to have completed. It will likely end, there may be something else after that, but there are no guarantees. 

When you say there is no prospect of saving another £9-10k in the next fifteen months, are you sure? The 5% scheme is a badly designed sticking plaster, where as getting to 10% or more is a solid financial position. Could you cut back to the bone for much of the next fifteen months to get there, could you and/or your partner take on an additional job to get extra money? As an example if you worked three shifts a night in a bar a week between you both then by your target date you would have the extra £10k (presuming it did not push you into higher rate tax), or a combination of one night a week each in a bar/stacking supermarket shelves etc. and some cutbacks and you could also get to the same point. 

JMA74

Most high street lenders offer 5% deposit mortgages without using the scheme so I wouldn't worry about that end date.  95% mortgages aren't going anywhere anytime soon 

ChrisLV

Thanks @MattMattMattUK. Increasing our income enough to get up to 10% isn't realistic, but we could get to 10% by accepting a longer commute (thus being able to go for properties at more like 160k) and accepting that we'll have pay the solicitor's fees & moving costs on credit. While not ideal, it's an option we'll keep open.

Thanks also @JMA74. If the 5% mortgages are likely to stick around, probably our best move is to wait till 2024 to buy and go with the above as a plan B if for some reason we can't get a 5% mortgage.