What is a mortgage
A mortgage is a loan to buy property, secured by a legal charge over that property. You own the home, but the lender’s charge is registered at HM Land Registry and must be repaid when you sell or remortgage. If you fall seriously behind, the lender can apply to court to repossess the home.
Most residential mortgages run for 25–35 years. On a repayment mortgage each monthly payment covers interest and part of the loan; on an interest-only mortgage you pay only interest and must repay the whole loan at the end from a credible repayment plan.
Key features
- Deposit and LTV. Rates are priced in loan-to-value bands (typically 60%, 75%, 85%, 90% and 95%). A bigger deposit moves you into a cheaper band. The government’s permanent Freedom to Buy guarantee scheme helps lenders offer 91–95% LTV mortgages on homes up to £600,000.
- Affordability. Lenders check income and outgoings and stress-test whether you could afford higher rates. Many lend up to around 4.5 times income; some go higher for certain borrowers.
- Insurance. Buildings insurance is required from exchange of contracts. Life cover is not compulsory but is strongly advised if others depend on you.
- Buying costs. Valuation, conveyancing, searches, broker fees and stamp duty. In England and Northern Ireland first-time buyers pay no Stamp Duty Land Tax on the first £300,000 of a purchase up to £500,000; Scotland (LBTT) and Wales (LTT) have their own rules.
Types of mortgage deal
Fixed rate
The rate is fixed for an initial period — most commonly 2 or 5 years, sometimes 10 years or longer. Payments are predictable, but leaving during the fixed period usually triggers an early repayment charge.
Tracker
The rate follows the Bank of England base rate plus a set margin, so payments rise and fall with base rate. Some trackers have no early repayment charges.
Standard variable rate (SVR)
When your deal ends you move to the lender’s SVR, which is usually much higher. Most borrowers remortgage or take a product transfer with the same lender before the deal ends.
Product fees
Many deals have an arrangement fee (often around £999) that can be paid upfront or added to the loan. A low rate with a high fee isn’t always cheaper — compare total cost over the deal period.
How repayments work
Repayment mortgages are amortising: payments stay the same for a fixed rate, with mostly interest at the start and mostly capital later.
SMARTPRO builds a full amortisation schedule so you can see how much of every payment goes to interest and how much to capital.
ESIS and APRC
Before you commit, the lender must give you a European Standardised Information Sheet (ESIS) with the rate, fees, monthly payment and the APRC — the annual percentage rate of charge, which assumes you stay on the reversion rate after the deal ends. Because most people remortgage, also compare the total cost over the initial deal period.
Help for first-time buyers
- Lifetime ISA — a 25% government bonus on savings of up to £4,000 a year towards a first home costing up to £450,000.
- Shared ownership — buy a share of a home and pay rent on the rest.
- Freedom to Buy — 5% deposit mortgages backed by a government guarantee.
How terms differ between lenders
| Term | How it can differ |
|---|---|
| Rate and fee | Fee-free deals with higher rates vs. low rates with £999+ fees; cashback offers. |
| Deal length | 2, 3, 5, 10-year fixes or lifetime trackers. |
| Early repayment charges | Tiered percentages during the deal; annual overpayment allowance (often 10%). |
| Affordability | Income multiples, treatment of bonuses, self-employed income and childcare costs. |
| Portability | Whether you can move the deal to a new home without charges. |
| Property criteria | New builds, flats above shops, non-standard construction, short leases. |
Checklist before you apply
- Compare total cost over the deal period, including fees, not just the rate.
- Note when the deal ends and set a reminder to remortgage 3–6 months before.
- Check early repayment charges and overpayment allowances.
- Consider a whole-of-market broker.
- Keep an emergency fund after completion.
This material is for general information only, describes UK rules in force on the publication date, and is not financial, legal or tax advice. Rules, schemes and lenders’ terms change — always check your agreement, your lender’s current terms and official sources such as the FCA, MoneyHelper and GOV.UK.