Mortgage FAQs
Here are our most commonly asked questions about mortgages
What is a mortgage?
Mortgages are loans used by buyers to purchase properties.
When you take on a mortgage, your lender will charge you interest in return for loaning you the capital.
And because mortgages are secured against the property being purchased, if you fail to pay back what you owe, your home could be repossessed.
How much can I borrow?
When applying for a mortgage, your lender will work out what you can borrow through a series of checks.
The amount you’re able to borrow will also 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 mortgage but don’t move home.
Reasons for remortgaging could include:
- Securing a better deal when your current deal expires
- Borrowing more capital to fund things like home improvements
- Consolidating or restructuring existing debt
What is conveyancing?
Conveyancing refers to the legal work completed by a solicitor when you buy or sell a property.
How do I prove what income I have?
Your mortgage lender will need to see proof of your earnings when deciding how much they may be willing to lend you through a mortgage.
If you are employed, your lender could request to see:
- Three months of your most recent payslips
- A P60 showing your annual income
If you’re self-employed, you may need to provide:
- An SA203 form showing your tax calculation
- At least two years of certified trading accounts
All applicants may also be asked for bank statements to show they incomings and outgoings.
How long do I take my mortgage out for?
The length of time your mortgage lasts for can vary.
Most terms are 25 years, but you may be able to secure a longer or shorter term subject to your lender’s rules and affordability tests.
To find out more about your options, speak to a mortgage advisor.
How do I choose the most suitable mortgage for me?
With so many different mortgages available, it can be daunting when choosing the right one for you.
Always speak to a mortgage advisor and consider your long-term plans.
What fees might I incur when taking out a mortgage?
You may have to pay a variety of fees when you take out a mortgage, including:
- 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?
Your mortgage agreement should make it clear if you have to pay back your loan before you reach a certain age.
If you’re unsure, speak to a mortgage advisor.
What is the difference between a standard variable rate and a Tracker Rate?
While standard variable rate (SVR) mortgages and tracker mortgages are both classed as ‘variable rate’ loans, they are some key differences.
The SVR is a mortgage lender’s standard rate of interest, and this can go up or down in line with the Bank of England’s base interest rate if a lender chooses.
SVR mortgages don’t usually come with any tie-in periods or early repayment charges, but always check with your lender first.
Tracker mortgages can also go up or down in line with the base rate, with the rate of interest you’re charged commonly just below or just above the base rate figure.
Trackers usually come with tie-in periods and early repayment charges.
What is a Higher Lending Charge?
Lenders will sometimes issue Higher Lending Charges (HLCs) if they agree to a mortgage that exceeds the value of the property being bought.
HLCs enable lenders to purchase insurance policies to protect them should the borrower default on their mortgage or be unable to pay it back due to the value of their property being less than the capital being loaned.
What is an Early Repayment Charge?
Lenders often put early repayment charges in place on mortgage deals with tie-in periods.
For example, if you take out a two-year fixed rate mortgage, you may face an early repayment charge if you pay off the loan in full or in part within that two-year period, perhaps because you’re selling your property.
Most fixed rate, tracker rate and discounted mortgages have early repayment charges attached, but standard variable rate (SVR) mortgages usually do not.
Early repayment charges are usually charged as a percentage of the outstanding mortgage.
What if I want to rent out my property?
To rent out your property when you have a standard residential mortgage, you may need your lender’s permission.
Your lender may switch you on to a buy-to-let mortgage, which could come with a higher interest rate, as buy-to-lets carry more risk for lenders.
What if I lose my job or I am having difficulty paying my mortgage?
It’s hugely important to speak to your lender as soon as possible if you are having trouble repaying your mortgage.
Your lender will have mechanisms in place to help you, including helplines and financial advice.
Do I need insurance with my mortgage?
You must take out a building insurance policy before you move into a property if you’re buying it with a mortgage.
Other insurance policies, such as life insurance or contents insurance, aren’t mandatory, but can provide peace of mind and help to protect 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?
Having an agreement in principle (AIP) from a mortgage lender doesn’t mean you are obligated to borrow from them.
Your lender also isn’t obligated to lend to you, with an AIP simply in place to show that the lender is willing to consider your application for a certain amount of money, based on information you’ve provided.
Is there a particular mortgage term I will be stuck with or do I have a choice about that?
Your mortgage term will depend on your lender’s criteria and affordability tests as much as it will your own assessment of what you can afford.
Although most mortgage terms are 25 years, longer or shorter terms can sometimes be taken.
However, while a shorter mortgage term means you’ll pay less interest overall, your monthly repayments will be higher.
Seek advice from a mortgage advisor about the best term for you.
How much can I borrow?
What you’re able to borrow through a mortgage will depend on how much you earn, your incomings and your outgoings.
Your lender will assess your financial situation and perform affordability checks before outlining how much they are willing to lend you.
When are fees payable and are they refundable?
There are a range of fees you may have to pay when you apply for a mortgage.
Many are payable up front, but you may be able to add certain fees to your mortgage loan – although doing so means you’ll pay back more.
Some mortgage fees are refundable, and others aren’t, so speak to a mortgage advisor or broker who will be able to provide a breakdown of the fees you can expect and the terms behind them.
How much deposit do I need?
A 10% deposit is the minimum amount many lenders will accept, but it may be possible to secure a mortgage with only a 5% deposit – for example, through Help to Buy if you’re a first-time buyer.
By saving a bigger deposit, you may be able to secure a more attractive interest rate.
Do I have to take out protection?
There’s no legal obligation for you to take out mortgage protection insurance.
But it can add peace of mind and protection for your family should you be unable to work, injured, or pass away unexpectedly.
I have had problems with credit in the past, can I get a mortgage?
While bad credit can make securing a mortgage more difficult, there may be options available to you.
Speak to an independent financial advisor to discuss your options.
Can I buy at auction with a mortgage?
Auction property purchases complete much faster than most sales on the open market, so having a mortgage agreement in principle (AIP) before you bid is vital.
If you successfully buy a property at auction, you’ll exchange contracts with the seller and pay your deposit on the same day – so you’ll also need your deposit funds ready and available before you attend.
Once you’ve exchanged contracts, you’ll have 28 days to complete, so speak to a mortgage advisor for guidance on how quickly your application can be completed.
Do I have to take a survey?
You’re not legally obligated to have a survey when buying a property.
However, having one is highly recommended given what you’re buying is likely to be the biggest investment you ever make.
A survey can help pinpoint any issues with the property before you buy it or provide great peace of mind that what you’re buying is structurally sound.
Your mortgage advisor should be able to help with guidance on the types of survey available.
What’s a repayment mortgage?
Repayment mortgages see the borrower pay back both the interest and capital through their monthly repayments.
More interest is paid down at the start of your term, but over time, you’ll start to pay down more of the capital as well.
Once your term is up, and if you’ve made all your repayments, you’ll have nothing more to pay and will be 100% the owner of your home.
