Everything you need to know
about Mortgages

Understanding Mortgages in the UK: A Comprehensive Guide from Mortgage One

Whether you're a first-time buyer or looking to remortgage, understanding the mortgage process can feel overwhelming. At Mortgage One, we're here to help simplify the process and guide you through everything you need to know. From the different mortgage types to finding the best deal, this guide will cover all the essential details to help you make an informed decision.

In This Guide:

• What is a Mortgage and How Do They Work?

• Types of Mortgages

• Specialist Mortgages

• How to Get a Mortgage

• FAQs

What is a Mortgage and How Do They Work?

A mortgage is a loan used to buy property or land, with the amount borrowed secured against the value of the property. The lender charges interest on the loan, and repayments are typically spread over 25 to 40 years. If you're unable to meet the repayments, the lender can repossess your home.

There are two main ways to repay your mortgage:

Repayment Mortgage: Your monthly payments cover both the interest and part of the capital. By the end of the term, you will have paid off the mortgage and own your home outright.

Interest-Only Mortgage: You only pay the interest each month, leaving the capital outstanding. You'll need a repayment plan to cover the full amount at the end of the term.

Types of Mortgages Available

Once you’ve decided between a repayment or interest-only arrangement, you’ll need to consider different types of mortgage deals. The following are common options:

Fixed-Rate Mortgages
Your interest rate is locked for a set period, typically between 2 to 10 years, offering predictability in your payments.

Tracker Mortgages
These follow the Bank of England’s base rate, with a margin applied by the lender.

Discount Mortgages
These offer a discount on the lender's standard variable rate (SVR) for an agreed period.

Standard Variable Rate (SVR) Mortgages
Lenders set this rate independently, and it can change at any time, often following changes to the Bank of England’s base rate.

Offset Mortgages
These are linked to your savings account, reducing the interest charged by offsetting your savings balance.

Remortgages
Switching your mortgage to a new deal, often to get a better rate once your initial deal ends.

Flexible Mortgages
Provide choices such as overpayments or payment breaks. While these are uncommon, a Mortgage One Broker can customise them to fit your needs.

Specialist Mortgages: Some mortgage types cater to specific needs:

First-Time Buyer Mortgages
Often feature higher loan-to-value (LTV) ratios, allowing those with smaller deposits to get on the property ladder.

Help to Buy Scheme
A government-backed initiative aimed at helping first-time buyers.

Buy-to-Let Mortgages
For those purchasing property to rent out.

Self-Employed Mortgages
Tailored for individuals with more complex income streams.

Bad Credit Mortgages
Designed for applicants with a poor credit history.

Second-Charge Mortgages
Allows you to borrow additional funds against your home.

How to Get a Mortgage

Getting a mortgage begins with understanding the eligibility criteria and gathering the necessary documentation. It can feel like a complex process, but you don’t have to go through it alone. Mortgage One is here to guide you every step of the way. Our expert advisors can help you find the best deals, offer tailored advice, and simplify the application process. Reach out to us today for personalized support.

FAQs

Can I get a mortgage with bad credit?
Yes, though you may face higher interest rates. Mortgage One specializes in finding suitable deals for those with bad credit histories.

What deposit do I need for a mortgage?
Typically, you’ll need at least 5-10% of the property’s value, but this can vary depending on the lender and the type of mortgage.

Should I choose a fixed or variable rate mortgage?
This depends on your financial situation and risk tolerance. Fixed rates provide stability, while variable rates may offer savings if interest rates remain low.