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Deposit Unlock Scheme – How does it work?

The Deposit Unlock Scheme was launched in 2021 as a new option to help First Time Buyers onto the property ladder – and it’s not just for first homes. We take a look at how it works and what to be aware of.

What is Deposit Unlock?

Deposit Unlock is a scheme to help people buy a new build home with a low deposit. When you purchase a new build it’s very common for a lender to ask you for a 15% deposit or more – but the Deposit Unlock scheme makes it possible to buy with just a 5% deposit.

Deposit Unlock is the brainchild of the Home Builders Federation, which represents housing developers. Whilst not all lenders are available to assist on the Deposit Unlock scheme, our experienced New Build Mortgage Advisers are available to help find a supporting mortgage lender.

It’s also limited to a certain number of house building companies at the moment.

Do I need to be a First Time Buyer to qualify for the Deposit Unlock scheme?

The Deposit Unlock scheme is available to both First Time Buyers and Homemovers to buy a New Build Home with a 5% deposit.

Why can’t I borrow as much on a new build?

Many mortgage lenders will let you buy with a 10% or even 5% deposit on a standard home, but on a new build they are more cautious and often require a 15% deposit.

The reason is that some new build homes can fall in value in the first couple of years. Buying a new home that has never been lived in is very appealing to many buyers, making them more valuable. Once they are no longer brand new, the property price may drop a little.

Lenders are always cautious about negative equity, which is where the size of the debt secured on a home is actually higher than its value.

What homes are eligible?

To access Deposit Unlock you will need to buy a new home from a participating housebuilder. The scheme is not available with all housebuilders. Contact us at The Mortgage Store where one of our Mortgage Advisers with a wealth of knowledge in the Deposit Unlock Scheme will be able to assist with discussing which housebuilders the scheme is available with.

Which lenders are eligible?

At present only three lenders are offering Deposit Unlock mortgages: Nationwide, Newcastle Building Society & Accord Mortgages. That will make it more difficult to find a competitively priced mortgage for your circumstances, as there are fewer lenders to compare.

Is it a good idea?

In principle, the Deposit Unlock scheme is a good idea, but do bear in mind that there are plenty of buying schemes available to both First Time Buyers and existing homeowners. Terms and conditions apply with all these schemes, so it’s a good idea to explore all the options before deciding on the most suitable approach for you.

As mortgage brokers, we have a lot of experience in exploring the different schemes available on behalf of our clients – so let us take the strain out of it for you.

We’ll spend time exploring your situation and what you’re looking to achieve. Then we’ll compare all the lenders offering mortgages that will suit your needs, and recommend the most effective way forward. Contact our team for an initial chat today.

Your home may be repossessed if you do not keep up with the repayments on your mortgage.