Here are our most commonly asked questions about mortgages
What is a mortgage?
Mortgages are loans that enable people to buy property.
In return for lending you money to buy a home, or buy-to-let property, your mortgage lender will charge you interest, meaning you’ll pay back more than you originally borrow at the start of your mortgage term.
Mortgages are also secured against the property being purchased, so if you fail to pay back your loan, your lender may look to repossess your property to cover their losses.
How much can I borrow?
How much you’re able to borrow through a mortgage will depend on:
- The price of the property you want to buy
- The amount you have as a deposit
- Your income and affordability
- Your lender’s individual criteria
What is a remortgage?
A remortgage is when you take out a new property loan but don’t move home.
Remortgages often occur when your current mortgage deal expires, and you want to secure a more competitive rate through a new lender.
Some borrowers also remortgage to borrow more capital.
What is conveyancing?
Conveyancing is the legal work undertaken by a solicitor or conveyancer when you buy or sell a property.
Legal work on property transactions can take time, so you should have your chosen solicitor or conveyancer in place before you sell or buy a new property.
How do I prove what income I have?
When you apply for a mortgage, your lender will want to see proof of your income so they can be certain your mortgage is affordable.
If you are employed, you’ll generally need to provide at least three months’ recent payslips and sometimes an annual P60 to show your salary.
If you’re self-employed, your lender may request to see an SA302 form detailing your tax projection and at least two years of trading accounts showing your business income.
Lenders often request three months of bank statements, too, showing incomings and outgoings.
How long do I take my mortgage out for?
The term of your mortgage will depend on your lender’s criteria and what you can afford as a borrower.
Speak to a mortgage advisor, who will be able to run through your options.
How do I choose the most suitable mortgage for me?
There are hundreds of mortgage deals on the market at any one time and choosing the right one for you can be daunting and tricky.
To assess which deal is right for you, you’ll need to consider your personal circumstances and your plans in the short, medium, and long term.
Speaking to a mortgage advisor can help.
What fees might I incur when taking out a mortgage?
When you take on a mortgage, you may come across a range of fees and charges.
Those could include:
- Valuation fees – charged by the lender to complete a valuation on the property you’re buying
- Solicitor fees – charged by your solicitor or conveyancer for legal work to complete your sale or purchase
- Stamp duty – if you’re buying a property costing more than £125,000, you may have to pay stamp duty land tax unless you’re a first-time buyer
- Arrangement fees – your mortgage lender may charge you a fee to arrange your mortgage. This fee can sometimes be added to the loan, but doing so will mean you pay back more
- Booking fees – some lenders charge booking fees to ‘book’ the funds for your mortgage
Do I have to repay my mortgage by a certain age?
Whether or not you have to pay back your mortgage by a certain age is likely to come down to your lender’s terms and conditions.
To find out more, the best approach is to speak to a mortgage advisor.
What is the difference between a standard variable rate and a Tracker Rate?
Standard variable rate mortgages and tracker mortgages are similar in that they are both classed as ‘variable rate’ loans.
A standard variable rate is a lender’s normal mortgage rate with no discounts or deals and can go up or down – usually depending on the Bank of England’s base rate.
This means your mortgage payments can go up or down if you have a standard variable rate mortgage.
A tracker rate is a type of mortgage than follows the base rate and can also move up and down.
However, while a standard variable rate mortgage often has no early repayment charges, a tracker rate mortgage usually comes with a tie-in period.
What is a Higher Lending Charge?
Higher Lending Charges (HLCs) are fees charged by mortgage lenders when the amount being borrowed by a buyer is greater than the value of the property they’re buying.
Lenders will often purchase an insurance policy with the fee, protecting them against losses should the buyer be unable to repay the mortgage.
What is an Early Repayment Charge?
Lenders often insert early repayment charges into their fixed, tracker or discounted rate deals that come with tie-in periods.
This means if the borrower pays off the mortgage in full or in part before the end of the tie-in, they’ll be charged a fee.
Early repayment charges are usually charged as a percentage of the outstanding mortgage.
What if I want to rent out my property?
If you want to rent out your property to tenants, and you have a mortgage secured on it, you may need permission from your lender.
Your lender may charge you a higher interest rate to reflect any change in risk.
What if I lose my job or I am having difficulty paying my mortgage?
The first, and most important step to take if you’re struggling to pay your mortgage is to contact your lender as soon as you can.
By law, lenders must treat borrowers ‘sympathetically and positively’, while many have dedicated helplines and facilities that can help.
Do I need insurance with my mortgage?
When you take on a mortgage, your lender will insist you take out an appropriate buildings insurance policy before you move into your property.
While other insurance policies, such as life insurance and contents insurance, usually aren’t a requirement, you should consider them to protect you and your investment.
If I do an Agreement in Principle (AIP) with this lender, what will I do if a better product comes up before my application?
An Agreement in Principle (AIP) lets you know if a lender may be willing to consider your mortgage application based on your credit score and some income information.
An AIP doesn’t mean you have to take on a mortgage with that lender, nor does it mean they have to lend to you.
So, if you find a better deal elsewhere after receiving an AIP, you are well within your rights to explore that with a new lender.
Is there a particular mortgage term I will be stuck with or do I have a choice about that?
The term of your mortgage will depend on your budget and affordability, as well as what your lender is willing to offer you based on their assessment of your financial situation.
A shorter mortgage term may mean you pay less interest, but because your monthly payments are spread out over a shorter period, they will be higher.
Keeping your mortgage affordable is crucial and as well as working with your lender, you should seek advice from a mortgage advisor.
How much can I raise as a mortgage?
The amount you’re able to borrow through a mortgage will be decided by your lender and based on your income and expenditure.
When are fees payable and are they refundable?
Some mortgage fees are payable up front, while others can be added to your mortgage loan if you wish.
Some fees are also refundable, and others are not.
Your mortgage advisor or broker should be able to provide you with a detailed breakdown and illustration of the mortgage you’re considering, and this will outline any fees, when they are due and whether they’re refundable.
How much deposit do I need?
The minimum deposit most lenders will accept from borrowers is 5%, although 10% is a more common requirement with many.
The larger your deposit, the better the interest rate you’ll be able to secure.
For first-time buyers, the Help to Buy scheme can be a way to purchase a home with a 5% deposit
Do I have to take out protection?
Mortgage protection insurance isn’t a legal requirement but can protect your investment and provide peace of mind for your family should the worst happen.
I have had problems with credit in the past, can I get a mortgage?
If you’ve had issues with credit before, you should speak to an independent financial advisor and mortgage broker to discuss your options.
Can I buy at auction with a mortgage?
If you’re looking to buy a property at auction, you should ensure you have an agreement in principle (AIP) before bidding.
You’ll also need to pay your deposit at the auction if you’re a successful bidder, so you’ll also need these funds to be available.
Completion on an auction property can be required as soon as 28 days from the date of the auction, so you should speak to a mortgage advisor for guidance on how quickly your application can be completed.
Do I have to take a survey?
It’s not a legal requirement to have a survey on a property.
However, your lender will require their own valuation and, in most cases, having a survey is good practice.
Your mortgage advisor should be able to help with guidance on the types of survey available.
What’s a repayment mortgage?
With a repayment mortgage, you’ll pay down the capital borrowed and interest, meaning your mortgage balance reduces every time you pay.
Early on in your mortgage term, you’ll pay mostly interest but in the later years, your capital amount will start to fall more quickly.