Learn all you need to know about mortgages and the different types
available with our comprehensive guide.
What is a Mortgage & How To Get One?
A mortgage is a form of a loan that is taken out to buy property or land. Similar to regular loans, mortgages have several different periods of length but typically last for 25 years.
A mortgage is secured against the value of your home until it is paid off. As such, should you fail to maintain your monthly repayments, the lender has the right to repossess your property.
While a mortgage is not required to buy a home (you can choose to buy the property outright in cash, or borrow the money from friends and other sources), mortgages are very commonplace due to the large sums of money involved. To apply for a mortgage, you can either visit a bank or building society or find a mortgage broker/independent financial adviser to help you identify the best mortgages available to you.
For more information on how lenders operate and calculate your mortgage eligibility, please refer to our 'How much can I borrow' page.
What is a Mortgage in Principle?
As the term suggests, a mortgage in principle is an agreement between yourself and your mortgage lender that states that they're willing to offer you a mortgage.mortgage amount to buy your desired property.
A mortgage in principle is generally seen as a great way to make your bid to buy a home stand out from the rest of the offers a seller might receive.
To learn more or get yourself a mortgage in principle, please see our dedicated mortgage in principle page.
Different Types of Mortgages
Depending on your buying circumstances, there are several mortgage types to choose from, as well as one that is specifically designed for Buy-to-Let properties.
Ordinary mortgages will fall into one of two main types, either a fixed-rate mortgage or a variable rate mortgage with each type having its pros and cons - For more information; please refer to our mortgage rates explainer.
A Buy-to-let (BTL) mortgage is designed for those who wish to buy a property with the intention of renting it out.
Unlike regular mortgages, BTL mortgages tend to be on an interest-rate only basis, meaning that you will still have to pay back the capital you borrowed at the end of the mortgage term. Typically, landlords will achieve this by selling the property or remortgaging the property. However, it is important to consider that as BTL mortgages are possibly interest-rate only, you could end up losing money if the property value falls below the amount you initially borrowed.
In addition to the interest-only status; because lenders see BTL properties as more of a risk (bad tenants causing damage to the property, etc.) BTL mortgages tend to have much higher costs and requirements than a regular mortgage.
BTL mortgages will often require higher deposits and have more associated fees (e.g. higher stamp duty,) as well as having a higher overall interest rate. Furthermore, there are several additional criteria that a client must pass to qualify for a BTL mortgage.
BTL Mortgage Requirements
The precarious nature of buy-to-let properties means that lenders are more discerning over who they choose to lend to. Typically, getting a BTL mortgage requires meeting specific criteria which differs from lender to lender, so whilst the following is typically a good starting point, the requirements list is not exhaustive:
A £25,000 per year income.
A high credit score with no outstanding debts.
You will be under the age of 70 - 75 by the time the mortgage is complete.
You're financially stable to manage the risks of investing in property.
You're already an existing property owner.