What is a mortgage? A first-time buyer’s guide


Taking out a mortgage for the first time can be daunting, especially with so many different deals to choose from. Here, we explain how they work.

What are mortgages?

A mortgage is essentially a loan you take out to help you buy a property. You usually pay it off over a period of several years while you are living in the property.

Often mortgages start off on a special rate to begin with which typically lasts from two to five years. Once that rate finishes you’ll usually then move onto what’s known as the lender’s ‘Standard Variable Rate’ (SVR). This is often higher than the rate you started on, but you’ll be free to remortgage to another special deal at this point.

When you apply for a mortgage, as with other types of loan, lenders will want to be certain you can afford to pay back what you owe. That means they’ll ask for lots of information about your income and outgoings to make sure you can afford the monthly payments.

How long do mortgages last?

A typical mortgage term is usually 25 years, but some lenders will allow longer terms of up to 30 years or even longer, depending on your age and circumstances.

You can opt for a shorter term if you want. You might decide, for example, that if you can afford it, you want to choose a 15 or 10 year term, so you can pay off what you owe sooner.

The longer the term you choose, the lower your monthly payments will be, but the more interest you’ll end up paying overall. If you choose a shorter mortgage term, your monthly payments will be higher, but you’ll clear your mortgage more quickly and pay less interest.

When choosing how long you want your mortgage to be, think carefully about how much you can afford to pay each month. Comparing monthly costs over a range of different terms can help you make your decision.

Do I need a mortgage?

Most people won’t be able to afford to buy a property outright, so unless you’re lucky enough to have a significant amount of savings in place, you’ll usually need to take out a mortgage if you want to get on the property ladder.

Of course, you won’t need to worry about mortgages if you inherit a property which doesn’t have a mortgage on it, or if you have generous parents that will buy a property for you. However, the vast majority of homes in the UK are mortgaged, so the chances are you’ll have to take one out to buy a home.

The amount you’ll need to borrow will depend on how much you’ve managed to save up as a deposit. You’ll usually need to save at least 5% of the property value to qualify for a mortgage, but the more you can afford to put down, the wider the choice of mortgages you’ll have available to you.

Can I get a mortgage?

Whether or not you are eligible for a mortgage depends entirely on your individual circumstances.

You’ll need to demonstrate to lenders that you’ll be able to afford the monthly payments, and they’ll also want to see how you’ve managed debts in the past. To do this, they’ll get a copy of your credit report, so it’s worth requesting a copy yourself before applying so you can see how good your score is. Ways to improve your credit score include closing down any credit accounts you no longer use, paying off as many debts as possible, and making sure you never miss debt repayments.

You can find out more about how likely you are to get a mortgage in our Can I get a mortgage? guide.

Helpful resources

We’ve got lots of information available to help you navigate your way through the mortgage maze. Here are some of our guides and mortgage calculators to help you work out how much you can afford to borrow, and how much it’s likely to cost.

Mortgage calculator: How much can I borrow?

Mortgage calculator: Loan to Value calculator

Guide: How mortgages work

Guide: How to get on the property ladder

Guide: The costs of buying a house



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