New Mortgage in the UK: 5% Deposit Instead of 20% for New Builds.

According to The Sun: The search for an apartment is made more accessible by a new loan program that allows for the purchase of a home with a deposit of just 5%.

The program Rezide Equity Loan offers the possibility to finance 95% of the property value from two major new build developers.

A New Opportunity for Buyers

The first purchase of real estate is often the most challenging phase, and experts believe that this program could support potential buyers.

Unlike the discontinued Help to Buy program, all participants in the new program are required to pay 4% interest from day one.

The developers Barratt Redrow and Persimmon have launched this initiative in cooperation with TSB and Barclays.

The main goal of the program is to enable buyers to acquire properties with less equity.

While some lenders require a 20% deposit, the Rezide Equity Loan program only needs 5%.

An additional 15% is covered by the Rezide Equity Loan itself.

80% of the market value of the property is financed through mortgages from TSB or Barclays.

For First-Time Buyers and Existing Owners

This loan is available for both first-time buyers and existing owners planning to purchase new properties from these developers across England.

The program is currently only available for the purchase of homes from Barratt Redrow and Persimmon.

Experts agree that this plan could benefit those struggling to save money for a deposit.

At the same time, they advise to carefully check the interest rates, which may be higher than those under the old Help to Buy program.

David Gallingworth, Associate Director at L&C Mortgages, emphasized that the Rezide program will offer buyers “more options.”

“15% equity loans go along with a standard mortgage and a 5% deposit. By providing an equity loan, a smaller standard mortgage of 80% of the property value is required,” he said.

He compared this program to the government initiative Help to Buy, which was active from 2013 until March 2023.

“While the Help to Buy loan was interest-free for the first five years, this loan incurs an interest rate of 4%,” he added.

David Stirling, an independent financial advisor at Mint Wealth Ltd, agreed and noted that the program “has risen from the ashes of Help to Buy.”

“This program could be a help for borrowers trying to find a deposit,” he emphasized.

Justin Moy, managing director of EHF Mortgages, noted that the program “encourages, but is not unique.”

“There are several programs that help new buyers with such low deposits,” he explained.

He also added that the restriction of purchases to only two developers could be “frustrating for many.”

The Help to Buy program has assisted over 225,000 buyers during its ten-year existence.

Experts believe it was scrapped because new owners often overpaid for their first homes.

The prices for small new builds fell similarly to the prices of new cars.

Moreover, there are concerns that this has increased property prices, as noted by the International Monetary Fund in 2014.

The Help to Buy program in Wales will continue to be available until September 2026.

What Help is There for First-Time Buyers?

Getting into the property market can seem challenging, but there are programs that help first-time buyers acquire their own home.

Help to Buy Isa – This is a tax-free savings account where the government adds an extra £50 for every £200 you save. However, the maximum aid amount is £3,000, which is paid to your lawyer upon moving. These accounts are already closed for new applications, but those who hold them can use them until November 2029.

Lifetime Isa – This is another government program that allows anyone aged between 18 and 39 to save tax-free and receive a bonus of up to £32,000 for the purchase of a first property. You can save up to £4,000 per year, and the government adds 25% on top.

Shared ownership – Shared ownership with a housing association allows you to buy a part of the property and pay rent for the remaining part. You can buy between 25% and 75% of the property, but are limited to certain options.

Mortgage support program – This program is available for those who have a 5% deposit, with a guarantee from the state for the lender to cover some of the losses if the buyer cannot repay their mortgage. It is suitable for residential properties up to £600,000.