Some banks are offering first-time buyers the chance to get onto the property ladder with just a £5,000 deposit
A mortgage broker has shared his candid views on the new £5k deposit schemes currently on offer, and when prospective homeowners should think twice about getting one. A growing number of banks and lenders are now giving first-time buyers the opportunity to secure a mortgage with just a £5k deposit.
Halifax, Lloyds and Yorkshire Building Society are amongst the major lenders now providing the scheme, which is specifically aimed at first-time buyers looking to take their first step onto the property ladder. Each lender carries its own terms and conditions, with Lloyds stipulating that the scheme cannot be used on a new build property, and that no portion of the £5k deposit can be gifted.
Alex Leppert, 35, who has worked as a mortgage broker for 14 years and launched his own firm, AL Mortgage Solutions, eight years ago, operating across two locations in Liverpool, has offered his frank assessment of the scheme and advised people on when to walk away.
Alex said: “This week you’ll have already seen Halifax launched an exclusive first-time buyer scheme which allows them to buy a property with a 5k deposit.
“Is it a good scheme and should you use it? Yes and no. For a lot of people it’s going to be exciting to know that you might now be able to get on the property ladder a little bit sooner than what you would have normally been able to, but you do need to go into it with your eyes open.”
Alex explained that those using the scheme would be borrowing more money at a greater interest rate, fixed for five years.
He went on to say: “Now if you’re currently sat at home, in your parents [house] not paying any rent and you’re able to save. Or you might already have a 5% deposit and you’re thinking shall I utilise the 5k deposit scheme? Personally I wouldn’t.
“I wouldn’t recommend it. I wouldn’t compare it to someone with a normal 5% deposit. That being said if you’re currently in rented accommodation paying you know over a thousand pound a month rent you’re struggling to save a 5% or a 10% deposit and you just want to get on the property ladder sooner.
“That’s potentially beneficial to you because it allows you to start paying a mortgage off, rather than you trying to pay rent and save for a deposit.
“You’re better paying a higher rate of interest on a mortgage, and becoming a property owner when house prices are only going one way rather than paying a landlord’s mortgage for the next 12-18 months whilst trying to save as well.
“But as I said if you’re currently at home able to save a deposit or you’ve already got a 5% or a 10% deposit available to you it doesn’t make immediate sense to me to be rushing into this 5k deposit scheme.
“But as always the long and short of it is get financial advice. There’s no one size fits all approach to mortgage advice and financial advice that’s unique to you and your circumstances.” Alex posted the guidance on the company’s Instagram page, where followers flocked to the comments section to express their gratitude for the tips.
One surveying firm wrote: “Good advice. The amount of clients we have who regret using Help to Buy (albeit very different) due to the additional costs involved.”
A second user responded: “Brilliant take AL Mortgage Solutions. Both sides of the coin explained.”
