UK Mortgages Explained
Everything You Need to Know Before Applying for a Mortgage
Introduction
Buying a home is one of the biggest financial commitments most people will ever make, and for many buyers, securing the right mortgage is the first step towards owning their dream property.
Whether you’re a first-time buyer, moving home, buying an investment property or remortgaging, understanding how mortgages work can make the entire process far less daunting.
At Yes Properties, we’ve created this comprehensive guide to explain the UK mortgage process in plain English. Alongside the information below, you can also use our Mortgage Calculator to estimate your monthly repayments and understand how much you may be able to borrow.
What Is a Mortgage?
A mortgage is a loan provided by a bank or building society that allows you to purchase a property.
The lender lends you most of the purchase price, while you contribute a deposit. The property itself acts as security for the loan until it has been repaid.
You’ll normally repay the mortgage through monthly instalments over an agreed period, typically between 25 and 40 years, although shorter and longer terms may be available depending on your circumstances.
How Much Deposit Will I Need?
Most lenders require a deposit.
Typical examples include:
| Deposit | Loan to Value (LTV) |
|---|---|
| 5% | 95% Mortgage |
| 10% | 90% Mortgage |
| 15% | 85% Mortgage |
| 20% | 80% Mortgage |
| 25% | 75% Mortgage |
Generally speaking:
- Larger deposits often provide access to lower interest rates.
- Lower Loan-to-Value (LTV) mortgages usually have more lender options.
- Some schemes are available for buyers with smaller deposits.
Calculate Your Monthly Mortgage Payments
- Down Payment
- Loan Amount
- Monthly Mortgage Payment
Use our mortgage calculator to estimate:
- Monthly repayments
- Total interest payable
- Mortgage affordability
- Different mortgage terms
- Various interest rates
Types of Mortgages
Fixed Rate Mortgage
Your interest rate remains the same for an agreed period (commonly 2, 3, 5 or 10 years), making monthly repayments predictable.
Best for: Buyers who want payment certainty.
Tracker Mortgage
Your mortgage follows the Bank of England Base Rate plus a set percentage.
Payments can increase or decrease as interest rates change.
Variable Rate Mortgage
The lender may increase or reduce the interest rate.
Monthly payments can fluctuate.
Discount Mortgage
Offers a discount against the lender’s Standard Variable Rate (SVR) for a set period.
Offset Mortgage
Links your mortgage with your savings account.
Savings reduce the amount of mortgage interest charged.
Interest Only Mortgage
You pay only the interest during the mortgage term.
The capital must usually be repaid at the end of the mortgage using an approved repayment vehicle.
Repayment Mortgage
The most common mortgage type.
Each monthly payment reduces both the capital and interest, meaning the mortgage is fully repaid by the end of the term, provided all payments are made.
How Much Can I Borrow?
Mortgage lenders consider several factors including:
- Income
- Employment
- Self-employment income
- Bonuses
- Overtime
- Existing loans
- Credit commitments
- Credit score
- Deposit amount
- Property value
- Household expenditure
Many lenders may lend approximately 4 to 4.5 times annual income, although this varies depending on individual affordability assessments and lender criteria.
Improving Your Chances of Approval
Before applying:
✅ Register on the electoral roll
✅ Pay bills on time
✅ Reduce outstanding debts where possible
✅ Avoid taking out unnecessary credit
✅ Save a larger deposit if you can
✅ Keep bank statements well managed
✅ Check your credit file
Mortgage Agreement in Principle (AIP)
An Agreement in Principle (also known as a Decision in Principle) is an indication from a lender of how much they may be willing to lend.
Many estate agents request an AIP before accepting offers because it demonstrates that you’ve already spoken with a lender or mortgage adviser.
Mortgage Fees You Should Know About
Possible costs include:
- Arrangement Fee
- Booking Fee
- Valuation Fee
- Survey Costs
- Broker Fees (if applicable)
- Solicitor’s Costs
- Stamp Duty (where applicable)
- Land Registry Fees
- Search Fees
First-Time Buyer Tips
- Know your budget.
- Obtain an Agreement in Principle.
- Save as much deposit as possible.
- Budget for moving costs.
- Don’t forget legal fees.
- Consider future affordability.
- Compare mortgage products.
Frequently Asked Questions
Can I get a mortgage with a 5% deposit?
Yes, some lenders offer 95% Loan-to-Value mortgages, subject to affordability and lending criteria.
How long does a mortgage application take?
This varies depending on the lender and complexity of the application, but many applications take several weeks from submission to mortgage offer.
Can self-employed people get a mortgage?
Yes. Lenders typically require evidence of income, such as tax calculations, tax year overviews and business accounts, depending on their lending criteria.
Should I use a mortgage broker?
A mortgage broker may be able to compare products from multiple lenders and help identify mortgages that suit your circumstances.
Why Choose Yes Properties?
At Yes Properties, we understand that buying a home is about more than simply finding the right property.
We’re here to guide you throughout your property journey, helping you understand the buying process and connecting you with trusted professionals where appropriate.
Whether you’re purchasing your first home or expanding your property portfolio, our experienced team is here to help.
Ready to Find Your Next Home?
Use our Mortgage Calculator to estimate your monthly repayments, then browse our latest properties for sale or speak to our team for expert guidance.
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