26 August, 2021
What is a Mortgage?
A mortgage is a large loan that is “secured” to a property or land. Most people do not have enough available money to buy a property outright using their own funds which is why they get a mortgage. A mortgage provider/bank or building society will borrow the money to the buyer on the understanding that it is to be paid back over 25 years (sometimes longer, sometimes shorter), including interest. The mortgage provider essentially owns your home until it is paid off in full. If monthly payments aren’t made, the mortgage provider can repossess your home and sell it to make their money back.
How much will I get a mortgage for?
The amount that you will be offered will be dependent on how much you earn (usually 4.5x your yearly salary but this can vary), your credit history/report and other outgoings so bear this in mind when you’re deciding how much you want to spend on your home.
How do mortgage deposits work?
When buying a house, you have to pay a percentage of the overall cost of the house upfront - this is called the deposit. Generally, deposits are around 10%, for example, if you wanted to purchase a home worth £150,000 with a 10% deposit, you would pay £15,000 upfront and have a mortgage of £135,000.
To put this into perspective, you would need to be on a salary (or combined salary) of £30,000 a year to be eligible for this mortgage.
Please also be aware that the lowest interest rates are reserved for those who pay a bigger deposit, typically around 40% and higher.
This is a very basic overview of how mortgages work to get you started without overwhelming you.
If you are looking for a mortgage, click here for fee free advice.
Editorial Disclaimer: This article was updated 18.10.2021
Opinions expressed here are the author's alone, and not those of any bank, credit card issuer or any other company. This article has not been reviewed, approved or otherwise endorsed by any of these organisations.
NB: The information on this page does not constitute financial advice, please do your own research to ensure that the product / service is right for your individual circumstances.