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Mortgage guarantee scheme explained

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HomeMortgage Help GuidesMortgage guarantee scheme explained

Mortgage guarantee scheme explained

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Last reviewed on 9th November 2023 by Martin Alexander (Mortgage Advisor)

The mortgage guarantee scheme launched in April 2021 and has helped over 24,000 homebuyers. Find out how the scheme works and whether you can buy a home with a 5% deposit.

What is the mortgage guarantee scheme?

The mortgage guarantee scheme is a government initiative that allows buyers to get a 95% mortgage, meaning you’ll only require a 5% deposit.

It sounds complicated, but the government underwrites part of the mortgage, typically over 80%. So, with a 95% mortgage, the government will guarantee 15% of the loan, meaning they’ll partially compensate the lender if you fail to pay your mortgage.

The government extended the scheme to run until 31st December 2023. 

Criteria and eligibility

To be eligible, you’ll need to meet the following criteria:

  • You must have a 5% deposit
  • The property you’re buying can’t exceed £600,000
  • First-time buyers and home movers can apply
  • You must be purchasing a residential home and not a buy to let or a second home
  • Mortgages under the scheme are only available on a repayment basis and not interest-only
  • You’ll need to meet the criteria of your mortgage lender, such as affordability and credit checks

ask a mortgage broker

Alternatives to the mortgage guarantee scheme

The mortgage guarantee is one of many ways to get on the housing ladder. There are other alternatives to explore:

  • You can buy a share of a property with the shared ownership scheme, which can be much more affordable than buying a home outright. You’d pay rent on the percentage you didn’t own, but you can buy more of the home once you can.
  • It’s also possible to apply for a mortgage with a guarantor. This can be beneficial when you need help meeting a lender’s criteria. A guarantor can act as security for your mortgage, making it easier to get approved.
  • You can buy the home you rent with the Right to Buy scheme if you’re a local council or housing association tenant. There are some great perks, such as buying your home for a discount.

Each scheme has terms and conditions, so you’ll need to be sure you qualify before applying. There are alternatives like the Right to Acquire scheme, allowing tenants to buy their rental property.

You can speak to an expert if you need help with what to do. We’ll then check your financial situation to determine which scheme you qualify for.

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About the author

Martin Alexander
Senior Mortgage Advisor | More Articles

Martin is a senior mortgage advisor and has held a CeMAP qualification for over 15 years while also completing an MBA in Global Banking & Finance.