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A new range of mortgage products aimed at borrowers with low deposits have arrived on the market courtesy of specialist lender Vida Homeloans.
The Belmont Green-owned firm has rolled out a line of 97% LTV mortgages, which allow borrowers to get on the property ladder with just 3% deposit, rather than the typical requirement of 5-10%. Here, we take a closer look at these trailblazing new deals.
How do these mortgages work?
Vida Homeloans’ ‘3 & Easy’ range is for borrowers with a minimum of 3% of the property’s value to put down as a deposit. This product line aims to make homeownership more attainable for specific demographics, including first-time buyers and renters.
Below you will find a summary of the key features of Vida’s ‘3 & Easy’ mortgages:
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Deposit requirements: Start at 3% of the property’s value
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Mortgage types available: 5 and 7-year fixed-rate agreements
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Loan sizes: Up to a maximum of £750,000 and a minimum of £50,000
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Term lengths: Up to 45 years
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Available to: First-time buyers, homemovers and remortgage borrowers
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Eligibility criteria: Flexible deals available for borrowers with adverse credit history, complex incomes and second job income, self-employed and contractors, but those with arrears on substantial unsecured debts will not qualify
The idea behind the ‘3 & Easy’ range is to offer flexibility to borrowers who often struggle to get on the housing ladder, as well as plug gaps in the market.
As well as the relaxed deposit requirements, the maximum term length of 45 years is longer than most UK lenders offer and the option to fix for 7 years is rarely offered by high street lenders, who typically have more stringent criteria for their low deposit mortgages.
Will the interest rate be higher?
Yes, but that is very much expected since high LTV mortgages tend to have some of the most expensive rates on the market, and specialist products like these, designed to be flexible for customers with complex needs, can also cost more in general.
At launch, rates on the 5-year fix start at 7.40% and the 7-year deals charge an identical amount of interest. There is a fee-free option for both, which charges a higher rate.
Do any other lenders offer 3% deposit mortgages?
Similar deals are available elsewhere, but Vida Homeloans’ 97% LTV mortgage deals are, in many ways, unique products in the current market. However, there are close alternatives to the ‘3 & Easy’ that may be a better option for borrowers with low deposits, including:
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Other high LTV mortgages: Most high street lenders offer mortgages at up to 95% LTV. Some borrowers may find that the interest rates available would be more favourable if they are in a position to save that extra 2% deposit.
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No deposit mortgages: A minority of lenders, such as Skipton Building Society, offer 100% LTV mortgages, though rates are similarly high.
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Family support: Family-supported mortgage deals such as guarantor mortgages can help you get onto the property ladder with minimal deposit of your own, although these are only an option if you have a family member who’s willing to help.
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Government schemes: Support schemes such as Shared Ownership and Right to Buy can help you get on the housing ladder with minimal deposit, but the drawback with these is that they are often limited to very specific types of property.
A mortgage broker can go through each of these options with you and compare them with the latest deals from Vida Homeloans to help you find the perfect mortgage for you.
Our analysis
John Tarazi, director and resident mortgage expert at Teito, had the following to say about Vida Homeloans’ ‘3 & Easy’ mortgage range.
“We welcome the news that Vida Homeloans has brought these interesting new products to the market. They have come at a time when customers are in desperate need of more flexibility, and they deliver that with low deposit requirements and longer term lengths.
“While these deals increase the number of options for first-time buyers and renters, particularly ones who would otherwise struggle to buy a home, it’s important to remember that they aren’t the only option for many who fall into these categories.
“The right government scheme or special low deposit mortgage deal available elsewhere may be more suitable for some, so be sure to speak to a mortgage broker before you make a final decision on your mortgage options, as they will make sure it’s an informed one.”
Get started here to book in a free, no-obligation chat with one of our mortgage brokers who specialises in low deposit deals to find out what all of your options are.
