Deposit Unlock Scheme: Is it right for you?

What is Deposit Unlock?

Deposit Unlock is a private scheme (backed by major housebuilders and mortgage lenders) that helps people buy a new build home with just a 5% deposit. The scheme was created by the Home Builders Federation and is supported by big-name lenders like Nationwide and Newcastle Building Society.

With the Deposit Unlock scheme, the builder offers insurance on the mortgage, which protects the lender in case something goes wrong. That means lenders are more confident about giving you a 95% mortgage.

Who can use Deposit Unlock?

The scheme is open to a wide range of buyers, not just first-time buyers.

You can apply if you are:

• A first-time buyer, or
• An existing homeowner looking to move

You’ll also need to:

• Have at least a 5% deposit
• Be buying a new build home from a participating developer
• Use a mortgage from a lender taking part in the scheme
• Be planning to live in the home yourself (you can’t use it for Buy to Let)

How does the scheme actually work?

• You choose a new build home from a developer who offers Deposit Unlock
• You put down a 5% deposit
• You get a 95% mortgage from a lender taking part in the scheme
• The developer pays to insure the mortgage behind the scenes, this gives the lender more security
• You move in, just like you would with any other mortgage

There’s no extra paperwork for you, and you don’t need to apply for the scheme separately. Your L&C mortgage advisor and the developer sort it out during the buying process.

Which developers and lenders offer it?

This scheme is backed by many of the UK’s biggest housebuilders, including:

• Barratt Homes
• Bellway
• Taylor Wimpey
• Vistry Group
• Persimmon
• Redrow

Participating lenders (at the time of writing) include:

• Nationwide Building Society
• Newcastle Building Society
• A few smaller regional lenders

More lenders may join the scheme, but not all mortgage providers are involved, so your choice of mortgage may be more limited than usual. Your L&C mortgage advisor will find the best lender for your circumstances.

What are the benefits?

• Only need a 5% deposit, which means you can buy sooner
• It’s open to existing homeowners as well as first-time buyers
• You get access to more competitive mortgage rates than standard 95% deals
• The scheme is free to use – you don’t pay for the insurance, the developer does
• You still own 100% of your home (this isn’t part-buy/part-rent)

Are there any downsides?

• The scheme only applies to new build homes
• You must buy from a participating developer
• Not all lenders are involved, so your mortgage options might be more limited
• Some buyers say that new builds can be priced slightly higher than older homes in the same area, so it’s worth checking the market value
• Because you’re only putting down 5%, you’ll be borrowing more which means higher monthly payments and possibly higher interest rates than if you had a bigger deposit

How do I apply

You don't apply seperately for Deposit Unlock. Instead:

• Find a developer who’s offering the scheme
• Let them know you're interested in using Deposit Unlock
• Get in touch with an L&C mortgage adviser who will find the bets best lender for you

The developer and your advisor will guide you through the process and the insurance side is all handled behind the scenes

It’s usually quite a smooth process, and you’ll follow the normal mortgage and conveyancing steps once your application is approved.

Can I sell the home later on?

Yes. Because you own the home outright you can sell it whenever you like. There’s no restriction on future resale prices, and you’re not locked into the scheme for life.

Can I combine it with any other schemes?

You can’t use Deposit Unlock together with First Homes or Shared Ownership, but you can use:

• A Lifetime ISA to help with your deposit
• Gifted deposits from family

Deposit Unlock is a really useful scheme if you’ve got a small deposit but want to buy a brand-new home. It’s especially helpful if you’re not a first-time buyer, since many other schemes don’t include second steppers.

If you’ve been put off by high deposit requirements, this could be the thing that finally makes buying your new build possible. Just make sure the builder and lender are both taking part and as always, get fee free advice from an L&C mortgage broker.