Mortgages
How much you borrow, over how long, on what kind of rate, and what it costs to leave early. The lender's name, the product code and the paperwork all follow from those four — and only those four change what you pay.
This page sets out how UK residential lending is put together. If you already know which situation you are in, start with the page for it.
Start here
The mechanics below are common to all of them. What changes is which parts a lender weighs most heavily, and which evidence it wants from you.
The first number
Loan to value is the loan expressed as a percentage of the property's value — so a deposit and an LTV are the same fact stated from opposite ends. It is the single figure that most determines which products you can apply for, because lenders price in bands rather than on a sliding scale.
The bands sit at round numbers. Crossing one in the right direction can move you to a materially better set of products; falling just the wrong side of one by a small amount is one of the few problems in a mortgage application that a few hundred pounds can solve outright.
That is worth knowing early rather than late. If you are close to a band, the useful question is not "what rate can I get" but "what would it take to get under the next threshold" — a slightly larger deposit, a lower offer, or a valuation that comes in where you expected.
Lenders price in LTV bands, so the gap between 76% and 75% can be worth more than the gap between 80% and 76%.
The value used is the lender's own valuation, not the price you agreed — if it comes in low, your LTV rises even though nothing else changed.
Decision one
Separate from the interest rate, and settled first. This decides whether the debt shrinks on its own or has to be cleared some other way.
The standard residential arrangement. Each payment covers the interest for the month and repays part of the balance, so the debt reaches zero at the end of the term. Early payments are mostly interest; the balance falls slowly at first and then much faster.
Also called a repayment mortgage
Payments cover interest alone and the balance is unchanged at the end of the term, so you need a credible plan to repay it. Lenders assess that plan and will not accept a vague one. Common in buy-to-let, restricted and evidence-heavy in residential lending.
Needs an acceptable repayment strategy
A split: some of the balance on capital and interest, the rest interest-only. Lower monthly cost than full repayment, with less left outstanding at the end than a full interest-only loan. Fewer lenders offer it and each sets its own limits on the split.
Not offered by every lender
Decision two
Almost every UK mortgage has an initial period on a product rate, after which it reverts to the lender's standard variable rate. What differs is what happens to the rate during that initial period.
Fixed or variable
Neither is inherently better. The right answer depends on how exposed your household budget is to a payment change, and on how likely you are to want out before the initial period ends.
| Fixed rate | Tracker or discount | |
|---|---|---|
| Monthly payment | Cannot change during the initial period. | Changes whenever the rate it follows changes. |
| If rates fall | You keep paying the rate you fixed at. | Your payment falls with it. |
| If rates rise | You are insulated until the fix ends. | Your payment rises, usually within a month or two. |
| Leaving early | An early repayment charge almost always applies. | Some products carry none — the main reason to choose one. |
| Budgeting | Straightforward: one figure for the whole period. | Needs headroom for the payment to move. |
| Typical fit | A household that needs the payment to be a known quantity. | Someone who may move, repay a lump sum, or wants to stay free to switch. |
A long fix is not simply a longer version of a short one. It buys certainty further out, but it also locks in a longer early repayment charge — which matters if there is any chance you will move, separate, or need to repay a lump sum before it ends.
Decision three
A headline rate describes only the interest. These are the charges that decide whether a low rate is actually the cheaper deal — which is why products should be compared on total cost across the initial period, not on the rate alone.
What you can borrow
Most lenders start with a multiple of income to set a ceiling. That is the number people quote to each other, and it is only the first of two tests. The second is an affordability assessment: verified income, less credit commitments, less an allowance for household spending, tested against a rate higher than the one you would actually be paying.
That stress test is a regulatory requirement, not a lender's caution. Its purpose is to establish that the payment would still be manageable if rates rose during the loan — so a short fix is assessed more conservatively than a long one, because the long one removes the exposure it is testing for.
The practical consequence is that two lenders can look at identical figures and arrive at maximum loans that differ by tens of thousands of pounds, purely from how each treats bonus, overtime, commission, benefits, pension contributions, childcare or a car finance agreement. Nothing about you changed. The reading did.
Committed credit reduces borrowing power more sharply than most people expect — a car finance payment can cost multiples of itself in mortgage capacity.
Clearing a small balance before applying sometimes raises the maximum loan by far more than the balance was worth.
Questions
For as long as you are confident you will not need to leave. A fix protects the payment for its length, but it also commits you to an early repayment charge for the same length. The question is less about forecasting rates than about how settled the next few years are — a house move, a separation, or an inheritance used to repay a lump sum are all far more likely to cost you than a rate movement.
No. A lower rate paired with a large product fee frequently costs more over an initial period than a slightly higher rate with no fee, and the smaller the loan the more likely that is — because the fee is a fixed amount while the rate saving is proportional to the balance. The comparison worth making is the total of payments plus fees across the whole initial period.
It preserves cash at a point when cash is usually short, and for that reason it is often the right call. But it is borrowing: the fee then attracts interest for the remaining term, not just for the initial period, so the true cost is considerably more than the fee itself. Pay it up front if you comfortably can.
A mortgage valuation is commissioned by the lender to confirm the property is worth enough to lend against. A survey is commissioned by you, in more or less detail depending on the level, to tell you about the condition of the building. They answer different questions, and a satisfactory valuation says almost nothing about whether the roof is sound.
Almost always, up to an annual allowance set as a percentage of the balance, without triggering the early repayment charge. Overpaying reduces the interest for the whole remaining term, so early overpayments are worth much more than later ones. Check whether your lender applies an overpayment to the balance immediately or only at the anniversary — it makes a real difference.
An agreement in principle usually involves a soft search, which is visible to you but not to other lenders and does not affect your score. A full application involves a hard search, which is recorded. Several hard searches in a short window can count against you, which is one practical argument for deciding where to apply before applying rather than after.
Keep reading
Your home may be repossessed if you do not keep up repayments on your mortgage. Figures shown on this site are illustrative estimates and do not constitute advice or an offer of credit.
Next step
Fifteen minutes is usually enough to settle all four and give you a borrowing range you can act on. No credit check, no cost, no commitment.
