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How to Get a Mortgage: The Ultimate UK Guide

⏱️ 10 Minute Read

Table of Contents

mortgage repayment chart

Getting a mortgage is often necessary if you’re looking to buy a house. A mortgage is a loan you take out to buy a property, usually paid back over 25 years or more. Getting a mortgage can seem daunting, but it’s pretty straightforward if you know what you’re doing.

The first step in getting a mortgage is determining how much you can borrow. This will depend on several factors, including your income, credit score, and deposit size. You can use a mortgage calculator to get an idea of how much you can borrow, but speaking to a mortgage advisor is always a good idea to get a more accurate picture. Once you know how much you can borrow, you can look for properties within your budget.

Types of Mortgages

When buying a home, most people require a mortgage to finance the purchase. A mortgage is a loan secured against the property you are buying, typically paid back over 25-30 years.

 

Several types of mortgages are available, each with its advantages and disadvantages. The most common types of mortgages are:

  • Fixed-rate mortgages: The interest rate stays the same for the entire mortgage term, making it easier to budget your monthly payments.
  • Variable-rate mortgages: The interest rate can go up or down depending on changes in the market, which means your monthly payments could fluctuate.
  • Interest-only mortgages: You only pay the interest on the loan for a set period, which can lower your monthly payments. However, you will still owe the total loan amount at the end of the term.
  • Buy-to-let mortgages: These are for people who want to buy a property to rent out to tenants. The interest rates are usually higher, and you may need a larger deposit.

Mortgage Interest

The interest rate on your mortgage is the amount of money you will pay to borrow the money. Shopping around to find the best interest rate is essential, as even a tiny difference can significantly impact your monthly payments. The interest rate can be fixed or variable and can be affected by factors such as the Bank of England base rate, inflation, and the lender’s policies.

Mortgage Terms

The term of your mortgage is the length of time you have to pay it back. Most mortgages have a 25-30 years term, but you can choose a shorter or longer term depending on your circumstances. A longer term will mean lower monthly payments, but you will pay more in interest over the life of the mortgage. A shorter time will mean higher monthly payments, but you will pay less overall interest.

In summary, understanding the different types of mortgages, interest rates, and mortgage terms is essential when buying a home. Take the time to research your options and find the best mortgage for your needs and budget.

selling mortgage

Mortgage Eligiblity Criteria

Before applying for a mortgage, you must meet the eligibility criteria. Here are some of the key factors that lenders will consider when deciding whether to offer you a mortgage:

 

Age

You must be at least 18 years old to apply for a mortgage. Some lenders may have a maximum age limit, which can vary depending on the type of mortgage you are applying for.

 

Income

Lenders will want evidence of your income to ensure you can afford the mortgage repayments. This will usually involve providing payslips or bank statements. If you are self-employed, you may need to provide additional documentation, such as tax returns or accounts.

 

Credit history

Your credit history is an essential factor that lenders will consider when assessing your mortgage application. They will want to see that you have a good track record of managing credit, such as credit cards or loans, and paying bills on time. Getting approved for a mortgage may be easier if you have a good credit history.

 

Deposit

You typically need a deposit of at least 5% of the property’s value to qualify for a mortgage. However, some lenders may require a larger deposit, particularly if you have a low credit score or are buying a property in a high-risk area.

 

Affordability

Lenders will also assess your affordability when deciding whether to offer you a mortgage. This involves looking at your income and outgoings to ensure you can afford the repayments. They may also consider any other debts or financial commitments you have.

Meeting the eligibility criteria is crucial to get approved for a mortgage. Ensure you have all the necessary documentation and can afford the repayments before you start applying.

mortgage housing UK

How to Apply for a Mortgage

Preparation

Before you start the mortgage application process, you need to prepare yourself. This will help you avoid any unnecessary delays or complications. Here are some things you should consider:

  • Check your credit score: Your credit score is an important factor in determining your eligibility for a mortgage. Make sure your credit score is in good standing before applying.
  • Calculate your budget: Determine how much you can afford to pay each month for your mortgage. This will help you choose the right mortgage product for your needs.
  • Gather necessary documents: You will need to provide proof of income, identification, and other documents. Make sure you have all the required documents ready before applying.
 

Application Process

Once you have prepared yourself, it’s time to start the application process. Here are the steps to follow:

  1. Find a lender: Shop around for a lender that offers the best mortgage product for your needs. The best way to do this is via a mortgage broker to get whole or market access and availability of products not publicly advertised on bank websites.
  2. Submit your application: Fill out the lender’s mortgage application form and submit it with the necessary documents.
  3. Wait for approval: The lender will review your application and determine your eligibility for a mortgage. This process can take several days to several weeks.
  4. Get a mortgage offer: If approved, the lender will make you a mortgage offer. Carefully review the terms and conditions of the offer before accepting it.
  5. Complete the purchase: Once you have accepted the mortgage offer, you can proceed with the purchase of your property. The lender will release the funds to your solicitor, who will then complete the transaction.
 

By following these steps and being prepared, you can increase your chances of getting approved for a mortgage and owning your dream home.

 

Choosing a Mortgage Lender

When getting a mortgage, choosing the right lender is just as important as finding the right home. Here are some key factors to consider when selecting a mortgage lender.

 

Research

Before you start shopping for a mortgage, it’s essential to do your research. Start by checking out the different types of lenders available, including banks, credit unions, and mortgage brokers. Look at their interest rates, fees, and terms, and compare them to find the lender that offers the best deal for you.

You should also research the lender’s reputation and customer service. Check online reviews and ask for recommendations from friends and family who have recently completed the mortgage process. A lender with a good reputation and excellent customer service can make the entire process much smoother and less stressful.

Comparing Mortgage Offers

Once you have narrowed your list of potential lenders, it’s time to compare their offers. Make sure you compare apples to apples by looking at the same loan terms and conditions. Here are some key factors to consider:

 

  • Interest rates: This is the amount you will pay each year to borrow the money. Look for the lowest interest rate you can find, but also consider other factors like fees and closing costs.
  • Fees: Lenders charge various fees for processing your mortgage application, including origination fees, application fees, and underwriting fees. Ensure you understand all the fees you will be charged and compare them across different lenders.
  • Loan terms: This includes the length of the loan and the type of interest rate (fixed or adjustable). Choose a loan term that works for your budget and financial goals.
  • Customer service: As mentioned earlier, good customer service can make a big difference in your mortgage experience. Look for a lender that is responsive, helpful, and easy to work with.
  • Total Cost: this is the most crucial point to compare, it’s hard to look at interest rates or APR % when some mortgage products have fees and others do not. Instead use an online calculator to add up over your fixed term (if you get a fixed mortgage) how much you’ll pay over the time you expect to have the mortgage, plus fees to work out the ‘true’ total cost to fairly compare products. Good brokers will do this for you. 
 

By researching and carefully comparing offers, you can find the right mortgage lender for you.

 

Mortgage Fees

When you apply for a mortgage, you must pay various fees. Here are some of the common costs associated with getting a mortgage:

 

Application fee

Lenders may charge an application fee when you apply for a mortgage. This fee covers the cost of processing your application. The amount of the fee can vary depending on the lender, but it is typically between £100 and £250. Some lenders may waive this fee, so it’s worth asking if you can avoid it.

Valuation fee

The lender charges a valuation fee to cover the cost of valuing the property you want to buy. The lender wants to ensure the property is worth the amount you are borrowing. The valuation fee can vary depending on the property’s value, but it is typically between £150 and £1,500.

Legal fees

You will need to pay legal fees when you apply for a mortgage. These fees cover the cost of hiring a solicitor to carry out the legal work associated with purchasing a property. The legal fees can vary depending on the solicitor you choose, but it is typically between £500 and £1,500.

Arrangement fee

The lender charges an arrangement fee to cover the cost of setting up your mortgage. This fee can vary depending on the lender and the type of mortgage you choose. It is typically between £500 and £2,000.

Early repayment fee

If you decide to pay off your mortgage early, you may be charged an early repayment fee. This fee compensates the lender for the interest they would have earned if you had continued to pay your mortgage over the agreed term. The amount of the fee can vary depending on the lender and the terms of your mortgage.

It’s important to know the fees associated with getting a mortgage, as they can add up quickly. Ensure you understand what fees you will be required to pay before applying for a mortgage.

Completing Your Mortgage

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Congratulations! You have made it to the final stage of the mortgage process – closing the deal. This is where you will sign all the necessary paperwork and officially become a homeowner. Here’s what you need to know about closing your mortgage:

 

Completion Costs

Before closing, you will need to pay closing costs. These are fees charged by your lender and third-party providers for services rendered during the mortgage process. The fees vary depending on your lender, location, and loan type. Some common closing costs include:

  • Application fee
  • Appraisal fee
  • Credit report fee
  • Title search fee
  • Survey fee
  • Solicitors fee
  • Home Survey fee
 

Make sure you understand all the fees and what they cover before closing. You can negotiate some of these fees with your lender, so don’t be afraid to ask.

 

Completion Day

Before the day of completion, you’ll likely to also need to insure your home as a part of the conditions of the mortgage offer. This means getting buildings insurance to cover the house in case you need to re-build it completely. Without the right insurance, your lender may not release the funds for the mortgage. 

Your solicitor will handle all the work with your previously signed mortgage offer, releasing and drawing down the funds and processing the money to the seller of the house. 

 

After Completion

After closing, your lender will fund your loan, and you will officially become a homeowner. Make sure to keep up with your mortgage payments to avoid defaulting on your loan. If you have any questions or concerns, contact your lender or a solicitor for assistance.

Closing a mortgage can be a complex process, but with the right knowledge and preparation, you can navigate it successfully.

Managing Your Mortgage

Once you have secured a mortgage, it is important to manage it properly to ensure that you can comfortably afford the repayments. There are two key ways to manage your mortgage: repayment and refinancing.


Repayment

Making regular repayments on your mortgage is essential to ensure that you stay caught up on your payments. You should know the repayment schedule and the amount you need to pay each month. Budgeting for any potential changes in interest rates is also important, as this can affect your monthly payments. This was particularly bad throughout 2022 and 2023 which caught a lot of people off guard when interest rates shot up from 2% to 7%.


Most lenders set up a direct debit to take your mortgage repayments automatically monthly. This helps ensure that you never miss a payment and helps you to budget effectively. 


You should also consider making overpayments on your mortgage if you can afford to do so, as this can reduce the interest you pay over the mortgage term.


Refinancing

Refinancing your mortgage can be an excellent way to manage your mortgage if you are struggling to keep up with the repayments or want to take advantage of lower interest rates. Refinancing involves taking out a new mortgage to replace your existing one.

Before refinancing, it is important to consider the costs involved, as there may be fees for early repayment or for setting up a new mortgage. It would help if you also consider the interest rates and the term of the new mortgage to ensure that it is affordable and suitable for your needs.

If you are considering refinancing, it is important to seek advice from a qualified mortgage advisor to ensure that you are making the right decision for your circumstances.

Overall, managing your mortgage effectively ensures you can afford your repayments and avoid falling into arrears. By making regular repayments and considering refinancing if necessary, you can ensure that your mortgage remains affordable and manageable.

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