What is a mortgage?

It is a loan from a bank or building society that lets you buy a property. You then pay back the amount you have borrowed plus interest over a period of around 25 years, although you can take them out over longer or shorter terms.

The mortgage is secured against your property until you have paid it off in full. This means the lender could repossess your home if you fail to repay it.

You can get one either on your own or held jointly with one or more people.

How do mortgage deposits work?

You have to pay for part of the property yourself, and this amount is called the deposit.

It is shown as a percentage of the property's value, so if you bought a house for 200,000, a 10% deposit would come to 20,000.

Your mortgage provider will lend you the rest, which is called the loan to value (LTV). In the above example a 90% LTV mortgage would cover the remaining 180,000, which would be the amount you owe your lender.

Where can you get them?

Mortgages are offered by financial companies like banks and building societies.

You can get a mortgage directly from the lender; use our comparisons to find the right one.

You could also find a mortgage and get advice from a mortgage broker or independent financial adviser. Some are whole of market, which means they can offer mortgages from every lender, and some offer exclusive deals.

What type of mortgage do you need?

There are many different types of mortgage, each designed for different financial circumstances.

Mortgages for your first property

Mortgages for your financial circumstances

  • Mortgages for bad credit could let you buy a home even if you have had financial difficulties in the past. Here is how to get a mortgage with bad credit.

  • Mortgages with no deposit are not offered unless you have a guarantor named on the mortgage too. However, it can still be possible to get on the property ladder if you have a very small deposit saved; this guide explains how.

  • Self employed mortgages are for if you run your own business or have an income that is hard to prove to lenders. Here is how to get a self-employed mortgage.

  • Mortgages for older borrowers could accept you even if you are over the maximum age specified by most lenders; here is how to find one.

Mortgage for specific purposes

What are interest only and repayment mortgages?

Most mortgages are repayment mortgages. Your monthly payments will go towards both the interest charged on your mortgage and clearing the outstanding balance. By the end of the term you will have paid off the full amount you borrowed.

If you get an interest only mortgage, your monthly repayments only cover the interest owed, so your balance will not go down. At the end of the term you will need to pay off the full balance, so you will need to have saved up this amount separately using a repayment vehicle like savings, shares, an ISA or investment.

How much does a mortgage cost?

The amount you have to pay each month and in total over the life of your mortgage depends on the deal you get and the cost of the property.

Here are the costs of a mortgage explained in detail and how to work out if you can afford one.

The main costs are:


The interest rate will affect how much you have to repay overall and what you pay each month.

It is accrued across the lifetime of the mortgage and is charged as a percentage rate on the amount you owe.

For example, if you took out a 200,000 mortgage with an interest of 4% over 25 years, you could pay interest of about 116,702 and repay a total of 316,702.

The mortgage in the above example could cost around:

  • 1,056 per month with an interest rate of 4%

  • 1,289 per month at 5%

You can work out how much interest would cost on a mortgage for the amount you need. HSBC's interest calculator will show you the amount you would have to pay each month, the total interest amount and an illustration of how much of the balance you would pay off each year.

Mortgage fees

  • Product fees are charged for taking out the mortgage

  • Application fees can be charged when you apply for a mortgage, whether you end up taking it out or not

  • Valuation fees may be charged by your lender for working out how much your property is worth

  • Higher lending charges come with some mortgages if you have a small deposit

  • Telegraphic transfer fees are charged when the bank transfers the money they are lending to you (usually to your solicitor)

  • Broker fees can be charged if you take out a mortgage recommended by a broker

You may also have to pay fees on your old mortgage:

  • Early repayments charges if you pay it off before the end of its term

  • Exit fees are charged on some mortgages when you move to a new lender

Once you have your mortgage, missing repayments will usually mean you will be charged a fee by your lender, pushing up the total amount you owe.

Should you get a fixed or variable mortgage?

There are several different ways that mortgages can set their interest rates:

  • Variable mortgages can change their interest rate at any point, although they usually rise and fall roughly in line with the Bank of England base rate.

  • Fixed rate mortgages guarantee that their interest rates will not change for a set period, usually between one and five years.

  • Tracker mortgages have variable rates that follow the Bank of England base rate exactly. A mortgage set at 2% above the base rate would be 2.5% with the base rate at 0.5%. If the base rate later went up to 1%, the mortgage rate would change to 3%.

  • Discount mortgages offer a rate set at around one or two percent less than the lender's standard variable rate. The rate will rise and fall with the lender's standard variable rate, and the discount will last for a set period of a year or more.

How to get a mortgage

You will need to:

  1. 1.

    Save a deposit if you are buying your first home. You could use the equity in your property towards the deposit if you own your current home.

  2. 2.

    Find the property you want to buy

  3. 3.

    Find a mortgage through our mortgage comparison tables or use a mortgage broker

  4. 4.
  5. 5.

    Get a mortgage in principle, which will let you know approximately how much you could borrow

  6. 6.

    Put in an offer on the property

  7. 7.

    If your offer is accepted, take out the mortgage

You will then be able to buy your new home, although you will need a solicitor to handle searches, surveys and contracts.

Here is our comprehensive guide to the full process of buying a new home.

Will you be accepted for a mortgage?

Mortgage lenders all have different standards and requirements. The following factors will affect whether lenders will offer you a mortgage and how much they will be willing to lend to you:

  • The value of the property

  • Your deposit

  • Your age

  • The length of the mortgage term

  • Your credit record

  • Your income

  • If you are applying solely or jointly

This guide explains how lenders decide and if you can afford a mortgage.

How to manage your new mortgage

Once you move into your new home you will need to start making monthly repayments on your mortgage. If you miss any payments, the amount you owe could increase and your credit record could be damaged. If you fall too far behind your lender could repossess your house.

If you set up a direct debit to pay your mortgage, you will never miss a payment as long as there is enough money in your bank account.

Here is how to manage your mortgage so you can keep up with your repayments and make sure you are always on the best deal.