How does Deposit Unlock work?
Deposit Unlock is a relatively new scheme launched by the house-building industry to enable you to buy a new-build home with just a 5% deposit.
When you buy your home, the building developer pays a percentage of the purchase price into an insurance policy for your mortgage provider.
That insurance policy in turn reduces the risk of lending for your mortgage provider, as it will cover any potential losses for them if you were to default on your mortgage.
The insurance also enables you to benefit from a lower interest rate than you would normally get if you were borrowing 95% of your property’s value.
Which house builders are taking part in Deposit Unlock?
Developed by the Home Builders Federation, the scheme currently has 39 house-builders taking part, including:
Which banks and building societies are taking part in Deposit Unlock?
Newcastle Building Society, Nationwide Building Society and Accord Mortgages are all participating lenders for the scheme.
Others are expected to join.
When is Deposit Unlock launching?
The scheme launched in November 2021.
Why is Deposit Unlock launching?
The scheme is designed to help people who may not have big deposits stashed away to buy a new-build home.
It also aims to reduce the impact of the Help to Buy scheme closing in October 2022.
Help to Buy allowed first-time buyers to buy a new-build home with a 5% deposit, but the government topped this up with an equity loan, which would need to be paid back too.
Deposit Unlock is a bit like a Help to Buy replacement, without the additional loan from the government. But crucially, it's open to all buyers, not just first-time buyers.
Who can apply for Deposit Unlock?
The scheme is open everyone looking to buy a new-build home in the UK to use as their main residence.
You can't use Deposit Unlock for buy-to-let investments.
Can I buy any new-build property?
No, there are some restrictions on the type of property you can buy.
You can use Deposit Unlock to buy any houses and two-bedroom apartments, but not to buy studios or one-bedroom flats.
The developer you're buying the property from must be taking part in the scheme.
How does Deposit Unlock compare to Help to Buy?
Deposit Unlock can be used by anyone looking to buy a new-build home to use as their main residence.
In comparison, Help to Buy could only be used by first-time buyers.
Both schemes could only be used to buy a new-build property.
And both schemes enabled you to buy a property with a 5% deposit.
But under the Help to Buy equity loan scheme, the government topped this up with a 20% equity loan (or up to 40% in London).
The Help to Buy loan was interest-free for the first five years, but after that, the repayments would start to go up as you began paying the interest on top.
With the Help to Buy loan, your mortgage was only for 75% (or 55% in London) of your home’s value. However, you'd also pay back the Help to Buy loan to the government at the same time.
With Deposit Unlock, your mortgage will cover up to 95% of your home’s value. So you may have higher monthly mortgage repayments, but you won't be paying back the equity loan at the same time.
Another difference is that the Help to Buy equity loan scheme had price caps on the maximum value of a property that could be bought in each region. They ranged from £186,100 in the North east to £437,000 in the South East and £600,000 in London.
Deposit Unlock can be used to buy any house or two-bedroom apartment costing up to £750,000, as long as you can afford the mortgage repayments.
How does Deposit Unlock compare to the 95% mortgage guarantee scheme?
Like Deposit Unlock, the 95% mortgage guarantee scheme enables people to buy a property with just a 5% deposit.
With the mortgage guarantee scheme, lenders pay the government to provide a guarantee.
Under Deposit Unlock, house-builders pay an insurer to provide it.
Another difference is that the 95% mortgage guarantee scheme can be used to buy both existing properties and new build ones.
Deposit Unlock is only available for new-builds.
The 95% mortgage guarantee scheme is also open to first-time buyers and all home-movers.
Deposit Unlock is open to anyone looking to buy a new-build property to use as their main residence.
Currently, more lenders have signed up to the 95% mortgage guarantee scheme than with Deposit Unlock.
Finally, the 95% mortgage guarantee scheme is due to close at the end of December 2023.
Are there any catches with Deposit Unlock?
No, there aren’t any catches but there are some restrictions, as the scheme cannot be used to buy any property.
As with any scheme to help you buy a home, it's important to weigh up the pros and cons to see if it is right for you.
Also, take your time to compare it with other schemes, such as Shared Ownership, in case it might suit you better.