A mortgage in the UK is a long-term loan you use to buy a property, secured against the home itself: you put down a deposit (usually at least 5% to 10% of the price), borrow the rest from a bank or building society, and repay it in monthly instalments with interest over a term that commonly runs 25 to 35 years. The lender registers a legal charge over the property, which means they can ultimately force a sale if you stop paying. The size of your deposit, the type of deal you pick, and the length of the term together decide what you pay each month and what the loan costs you overall.
What the Lender Gets in Return
A mortgage isn’t an unsecured loan. Under the Land Registration Act 2002, the lender’s interest is registered as a legal charge against your property’s title at HM Land Registry.1legislation.gov.uk. Land Registration Act 2002 That charge gives the lender a specific set of powers, including a statutory right of sale that comes from the Law of Property Act 1925 and arises automatically once the mortgage is created by deed.2legislation.gov.uk. Law of Property Act 1925 – Section 101 Lenders rarely use that right without a long court process, but it’s the legal backbone of the whole arrangement.
Your deposit is the share of the price you pay upfront; the mortgage covers the rest. Buy a £300,000 home with a £30,000 deposit and the mortgage is £270,000, giving a Loan-to-Value ratio of 90%. LTV matters because it drives the interest rate you’ll be offered. Lenders treat higher LTV as higher risk, so a buyer putting down 25% will almost always get a better rate than one putting down 5%.
How You Repay the Loan
Capital and Interest
The standard structure is a capital and interest mortgage, often just called a repayment mortgage. Each monthly payment covers that month’s interest plus a slice of the original balance, so if you keep up every payment, the debt reaches zero at the end of the term. UK mortgage terms traditionally ran for 25 years, but rising prices have pushed the average first-time buyer term closer to 30, with nearly one in five first-time buyers now stretching to 35.3The Guardian. Are 25-Year UK Mortgages a Thing of the Past A longer term lowers your monthly payment and raises the total interest you pay, sometimes by tens of thousands of pounds.
Interest-Only
On an interest-only mortgage, each monthly payment covers only the interest. The capital balance doesn’t move. At the end of the term you still owe the full amount you first borrowed, and you need a credible plan to repay it, whether that’s savings, investments, or selling the property. Lenders demand evidence of that repayment strategy before approving the deal, and most residential lenders now restrict interest-only to borrowers with substantial equity or high incomes. First-time buyers rarely qualify.
How the Interest Rate Behaves
Fixed Rate
A fixed-rate mortgage locks your interest rate for a set introductory period, typically two or five years, with some lenders offering ten. During that window your monthly payment doesn’t move, whatever the Bank of England does. The certainty is the appeal. The trade-off is that fixed rates usually start slightly higher than equivalent variable rates, and leaving the deal early usually triggers an early repayment charge. When the fix ends, you drop onto the lender’s standard variable rate unless you remortgage.
Tracker Rate
A tracker ties your rate directly to the Bank of England base rate, which sits at 3.75% as of early 2026.4Bank of England. Interest Rates and Bank Rate The lender adds a fixed margin on top, so a tracker set at base rate plus 1% charges 4.75% while base rate stays where it is. If base rate falls, your payments fall; if it rises, they rise. The visible link to a published rate is the main advantage over an SVR, since the lender can’t quietly widen the margin. Some trackers run for an introductory two or five years; others last the full term.
Standard Variable Rate
Every lender has a standard variable rate, and it’s almost always the most expensive option. It’s the rate you default onto when a fixed or tracker deal ends, and the lender can change it at any time, sometimes independently of the Bank of England. Sitting on an SVR for more than a month or two is usually a sign you need to remortgage.
Offset
An offset mortgage links a savings account to the mortgage balance. Instead of earning interest on your savings, that money reduces the balance the lender charges interest on. If the mortgage is £200,000 and you hold £20,000 in the linked account, you pay interest on £180,000. You don’t earn savings interest, but there’s no tax on the offset benefit, and mortgage rates are almost always higher than savings rates, so the maths usually works in your favour. Offset deals carry slightly higher rates and suit people who keep significant savings they don’t need immediate access to.
What It Costs Beyond the Deposit
The deposit is the biggest upfront payment, not the only one. Budget for:
- Arrangement fee: charged by the lender for setting up a competitive deal, often at least £1,000 and sometimes £1,500 or more. You can usually add it to the loan, but you’ll pay interest on it for the full term.
- Valuation fee: covers the lender’s property check. Some lenders include it free on higher-value deals; others charge a few hundred pounds.
- Conveyancing fees: your solicitor’s charges for the legal transfer, typically £800 to £1,500 plus disbursements such as search fees and Land Registry charges.
- Broker fee: if you use a fee-charging broker, most borrowers pay £500 to £700. Fee-free brokers earn commission from lenders instead and generally have access to the same products.
- Telegraphic transfer fee: usually £25 to £50 to move the funds securely on completion day.
Together these can easily reach £2,000 to £4,000 on top of the deposit, before stamp duty.
In England and Northern Ireland, Stamp Duty Land Tax is charged on the portion of the price above £125,000, with tiered rates rising from 2% between £125,001 and £250,000 to 12% above £1.5 million. First-time buyers pay nothing up to £300,000 from April 2025, with the relief applying on properties up to £500,000; above that ceiling, standard rates apply to the full price.5GOV.UK. Stamp Duty Land Tax – Residential Property Rates Scotland has its own Land and Buildings Transaction Tax with a £145,000 nil-rate band,6Revenue Scotland. Residential Property Rates and Bands and Wales has Land Transaction Tax with a £225,000 nil-rate band,7Welsh Government. Land Transaction Tax Rates and Bands so the tax bill on the same price can differ noticeably across the UK.
Buildings insurance is also a condition of the mortgage. The policy must cover at least the full rebuilding cost of the property. You can shop around for your own insurer; the lender can reject one that doesn’t meet their minimum requirements, but they generally can’t force you to buy their own policy.
From First Enquiry to Keys
Agreement in Principle
Before viewings, most estate agents expect to see an Agreement in Principle: a statement from a lender confirming they’d be willing to lend you a specific amount based on a preliminary look at your finances. It’s not a guarantee. The lender may run a soft or hard credit check depending on the provider, so ask which before applying. An AIP doesn’t commit either side; it just lets sellers take your offer seriously.
The Full Application
Moving from AIP to a formal application means verifying you can actually afford the repayments. Financial Conduct Authority rules require lenders to run a detailed affordability assessment, stress-testing whether you could still pay if rates rose. Expect to provide:
- Identity documents under the Money Laundering Regulations 2017: a signed passport or UK driving licence plus proof of address.8GOV.UK. Proof of Identity Checklist
- Proof of income: for salaried employees, the latest P60 and three months of payslips; for the self-employed, SA302 tax calculations from HMRC covering the last two to three tax years.9GOV.UK. Get Your SA302 Tax Calculation
- Three to six months of bank statements, so the lender can see your spending, existing debts, and whether your outgoings match your declaration.
Credit history carries real weight. Missed payments, defaults, or heavy reliance on credit can sink an application even if the numbers otherwise work.
Valuation, Offer, and Completion
Once you’ve applied, the lender arranges a valuation. That’s for the lender’s benefit, not yours: they want to confirm the property is worth enough to secure the loan. If the valuation comes in below the agreed price, you may have to renegotiate with the seller or increase your deposit to close the gap. The lender’s valuation is not a survey, so if you want to know about damp, roof problems, or subsidence, you’ll need to commission your own, with costs running from a few hundred pounds for a mid-level inspection into four figures for the most comprehensive report.10RICS. House Surveys UK – The Costs, Types and Benefits of an RICS Home Survey
If the valuation satisfies the lender, they issue a formal mortgage offer, usually valid for three to six months. Your solicitor or licensed conveyancer then handles the legal work: checking title, running local authority searches, and raising enquiries with the seller’s solicitor.
Exchange of contracts is the point of no return. Under the Law of Property (Miscellaneous Provisions) Act 1989, the contract must be in writing, signed by both parties, and contain all the agreed terms.11legislation.gov.uk. Law of Property (Miscellaneous Provisions) Act 1989 – Section 2 Your deposit goes to the seller’s solicitor and a completion date is fixed. Pulling out after exchange means losing your deposit and potentially facing a claim for the seller’s losses.
On completion day, the mortgage funds move from your lender through your solicitor to the seller. The legal title transfers to your name, the solicitor registers the transfer and the lender’s charge at the Land Registry, and you get the keys.12GOV.UK. Practice Guide 1 – First Registrations From accepted offer to completion typically takes eight to twelve weeks, longer if there’s a chain.
Leaving or Changing Your Deal
Most fixed-rate and some tracker mortgages carry early repayment charges during the introductory period. If you want to repay the whole loan, overpay beyond an agreed limit (usually 10% of the balance a year), or switch to a different lender before the deal ends, you pay a penalty as a percentage of the outstanding balance. On a two-year fix the charge is typically 1% to 2%; five-year fixes often start at 5% and drop a point a year. On a £200,000 mortgage, a 3% charge means £6,000.
Remortgaging means switching to a new deal, with the same lender or a different one. Most people remortgage when their fixed or tracker period ends to avoid dropping onto the SVR. Start the process about three months before your current deal expires: lenders will often let you lock in a new rate ahead of time without committing you until the switch date. If you’re moving home, some deals are portable, meaning you can take the rate with you to a new property, but porting still involves a fresh affordability check, so approval isn’t automatic.
If You Can’t Pay
Missed payments are serious, but repossession doesn’t happen overnight. If you fall into arrears, the lender must contact you to discuss repayment options before taking enforcement action. FCA rules require lenders to treat repossession as a last resort, used only after other reasonable attempts to resolve the situation have failed.13Financial Conduct Authority. Mortgage Rule Review – Feedback to DP25/2 and Roadmap In practice, that means working with you on temporary payment reductions, a longer term, or a spell on interest-only.
If those efforts fail, the lender can apply for a court order. You’ll receive court paperwork, attend a possession hearing, and the judge decides whether to grant an outright order or a suspended one with conditions you can meet. Under the Mortgage Charter agreed by most major banks and building societies, lenders have committed not to force borrowers from their home within a year of the first missed payment except in exceptional circumstances. Even after a court order, eviction requires a warrant, with at least 14 days’ notice. The process from first missed payment to eviction normally takes several months, so contacting the lender early gives you far more options than waiting.
If Your Deposit Is Small
From July 2025 the UK government’s Mortgage Guarantee Scheme is permanently available. It lets first-time buyers and home movers buy with a deposit as small as 5%, with the government providing a partial guarantee to the lender on mortgages between 91% and 95% LTV.14GOV.UK. 2025 Mortgage Guarantee Scheme The guarantee is between the government and the lender; it doesn’t change your obligations as the borrower. You still have to pass the lender’s affordability checks and you still pay interest on the full loan.
Shared ownership is another route if buying outright is out of reach. You buy a share of the property, usually between 25% and 75%, and pay rent on the remaining share to a housing association. Household income must be £80,000 or less, or £90,000 or less in London.15GOV.UK. Shared Ownership Homes – Who Can Apply You can buy additional shares over time, a process called staircasing, until you own the property outright.