Mortgage FAQ – Your Most Common Mortgage Questions Answered
Mortgages can feel complex, particularly if you are applying for the first time or have not reviewed the market for several years. With different mortgage types, lender criteria, and financial checks involved, it is natural to have questions.
This mortgage FAQ brings together answers to some of the most common mortgage-related questions asked by UK borrowers. It explains key concepts, processes, and terminology in clear terms to help you understand how mortgages generally work. The information below is provided as general guidance only and is not regulated mortgage advice.
General Mortgage Questions
What Is a Mortgage?
A mortgage is a loan secured against a property. The loan is repaid over an agreed period, known as the mortgage term, typically through monthly repayments. If the mortgage is not repaid as agreed, the lender may have the right to repossess the property.
Mortgages are commonly used to purchase residential or buy-to-let property, but they can also be used for remortgaging or raising funds against an existing property.
How Long Does a Mortgage Last?
Mortgage terms commonly range from 25 to 35 years, although shorter and longer terms are available depending on lender criteria. The term length affects monthly repayments and the total amount of interest paid over time.
Some borrowers choose shorter terms to reduce overall interest, while others opt for longer terms to keep monthly payments lower.
What Is the Difference Between a Mortgage Term and a Fixed Rate?
The mortgage term is the total length of time you have to repay the loan. A fixed rate refers to the period during which the interest rate stays the same, such as two, five, or ten years.
Once a fixed-rate period ends, the mortgage usually moves onto the lender’s standard variable rate unless a new product is arranged.
Mortgage Types
What Types of Mortgages Are Available?
Common mortgage types include:
- Fixed-rate mortgages – The interest rate is fixed for a set period
- Variable-rate mortgages – The rate can change over time
- Tracker mortgages – The rate tracks a benchmark, often the Bank of England base rate
- Discount mortgages – A discount is applied to the lender’s standard variable rate
Each type works differently, and availability depends on lender criteria and market conditions.
What Is the Difference Between Residential and Buy-to-Let Mortgages?
A residential mortgage is for a property you plan to live in. A buy-to-let mortgage is designed for properties that will be rented out to tenants.
Buy-to-let mortgages are usually assessed differently, with more emphasis placed on rental income and typically higher deposit requirements.
What Is a Joint Mortgage?
A joint mortgage is where two or more people apply for a mortgage together. All borrowers are named on the mortgage and usually on the property title.
All borrowers are jointly responsible for the mortgage payments, regardless of individual income contributions.
Deposits and Loan-to-Value
How Much Deposit Do I Need?
Deposit requirements vary depending on the lender, mortgage type, and applicant circumstances. Residential mortgages commonly require deposits ranging from 5% to 20% of the property value, while buy-to-let mortgages often require larger deposits.
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The size of the deposit affects the loan-to-value ratio, which can influence product availability and interest rates.
What Is Loan-to-Value (LTV)?
Loan-to-value, or LTV, is the percentage of the property value that is being borrowed. For example, a £180,000 mortgage on a £200,000 property represents a 90% LTV.
Lower LTVs generally provide access to a wider range of mortgage products.
Can a Deposit Be Gifted?
Some lenders accept gifted deposits, often from close family members. Lenders usually require confirmation that the gift does not need to be repaid and that the donor will not have an interest in the property.
Gifted deposit criteria vary by lender.
Affordability and Income
How Do Lenders Assess Affordability?
Affordability assessments consider income, regular outgoings, existing debts, and lifestyle costs. Lenders use this information to assess whether monthly mortgage payments are likely to be sustainable.
Different lenders use different affordability models, which means borrowing amounts can vary.
What Income Can Be Used for a Mortgage?
Lenders may consider various types of income, including:
- Basic salary
- Overtime or bonuses (often averaged)
- Self-employed income
- Pension income
- Certain benefits, depending on lender criteria
The proportion of income accepted can vary between lenders.
Can Self-Employed Applicants Get a Mortgage?
Yes, self-employed applicants can apply for mortgages, although lenders often require additional documentation such as accounts or tax calculations.
Assessment methods vary, and the number of years of accounts required differs between lenders.
Credit and Mortgage Applications
What Credit Checks Do Mortgage Lenders Carry Out?
Mortgage lenders typically perform a credit check using information from credit reference agencies. This shows payment history, existing debts, and any adverse credit markers.
Credit checks help lenders assess risk, but they are only one part of the overall mortgage assessment.
Will Bad Credit Stop Me Getting a Mortgage?
Bad credit does not automatically prevent a mortgage application, but it can limit lender options and affect interest rates or deposit requirements.
The impact depends on factors such as how recent the issue was, its severity, and overall financial behaviour.
Does Checking My Credit Report Affect My Mortgage Application?
Checking your own credit report does not affect your credit file, as it is recorded as a soft search.
Mortgage applications usually involve hard searches, which are visible to lenders.
The Mortgage Application Process
How Long Does a Mortgage Application Take?
Timescales vary, but a typical mortgage application can take several weeks from submission to formal offer. Factors affecting timing include:
- Lender processing times
- Valuation requirements
- Complexity of the application
- Legal work
Delays are not uncommon, particularly during busy periods.
What Is a Mortgage Agreement in Principle?
An Agreement in Principle (AIP), also known as a Decision in Principle, is an initial indication from a lender of how much they may be willing to lend.
It is not a guarantee of a mortgage offer and is subject to full checks and underwriting.
What Is a Mortgage Valuation?
A mortgage valuation is carried out on behalf of the lender to confirm that the property provides suitable security for the loan. It is not a full structural survey.
The outcome of the valuation can affect the amount the lender is willing to offer.
Fees and Costs
What Fees Are Involved in a Mortgage?
Mortgage-related costs may include:
- Arrangement or product fees
- Valuation fees
- Legal fees
- Stamp Duty Land Tax (where applicable)
Not all mortgages carry the same fees, and costs vary depending on the transaction.
What Is Stamp Duty Land Tax?
Stamp Duty Land Tax is a tax payable on property purchases above certain thresholds in England and Northern Ireland. Different rules apply in Scotland and Wales.
Rates and thresholds can change and depend on factors such as property value and buyer status.
After the Mortgage Completes
Can I Change My Mortgage Later?
Some borrowers choose to remortgage or switch products when an initial deal ends. This is subject to lender criteria at the time.
Early repayment charges may apply if changes are made during a fixed or discounted period.
What Happens If Interest Rates Change?
If you are on a variable or tracker mortgage, changes in interest rates can affect monthly payments. Fixed-rate mortgages are not affected during the fixed period.
Understanding how your rate works can help you anticipate changes.
Summary
Mortgages involve a wide range of considerations, from deposits and affordability to credit checks and legal processes. This mortgage FAQ provides a broad overview of how mortgages generally work and addresses many of the common questions borrowers have when navigating the process.
Understanding the basics can help you feel more prepared when exploring mortgage options and speaking with professionals involved in the process.
This article provides general information only. For personalised guidance, regulated mortgage advice is required.
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Important information: Mortgage Bridge provides information only and acts as a mortgage introducer. We do not provide mortgage advice or make lender recommendations. We can introduce you to an FCA-regulated mortgage adviser who can provide personalised mortgage advice.