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Residential Mortgages

Buying a home is an exciting milestone, and we're here to make the journey as simple as possible. Understanding how mortgages work is the first step towards getting the keys to your new home. Let's break it down together.

A residential mortgage is a loan you take out from a bank or building society to buy a property you plan to live in. It's one of the biggest financial commitments you'll ever make, but don't worry, we're here to guide you through it.

You borrow the money to buy your home and agree to pay it back, with interest, over a set period. This period is called the mortgage term. Your home acts as security for the loan, which means if you are unable to keep up with the repayments, the lender could repossess the property.

What is a
Residential Mortgage?

How Do Mortgages Work?

When you take out a mortgage, you’re borrowing a portion of the property’s value from a lender. The remaining amount comes from your deposit.

This deposit may come from savings, a gifted deposit from family, or equity released from another property you already own.

Interior setting representing property ownership

What is Loan to Value (LTV)?

Loan to Value (LTV) is the percentage of the property price that you’re borrowing as a mortgage.

Buying a £200,000 property with a £20,000 deposit means borrowing £180,000 — a 90% LTV.

A lower LTV usually unlocks better rates and more lender choice. We’ll help you structure your application to make the most of your deposit position.

Mortgage affordability and financial planning

Do You Meet the Affordability Criteria?

Lenders assess affordability by reviewing your income, regular outgoings and existing credit commitments to ensure the mortgage is sustainable.

We take the time to understand your full financial picture and recommend solutions that are realistic, sustainable and aligned with your goals.

Lifestyle planning and affordability

Types of Interest Rates

Your monthly mortgage payment is made up of two parts: repaying some of the capital (the original loan amount) and paying the interest.

There are a few main types of interest rates to choose from.

  • Your interest rate is locked in for a set period, usually 2, 3, 5, or 10 years.

    This means your monthly payments will stay the same during that time, making it easier to budget.

Then there’s variable rate mortgages which often show as one of the following:

  • The interest rate "tracks" the Bank of England's base rate, plus a fixed percentage. If the base rate changes, so will your payments.

  • This is the lender's default interest rate. It can change at any time, and you'll usually move onto it after your initial fixed or tracker deal ends.

  • A discounted variable rate mortgage offers a discount off the lender’s standard variable rate (SVR) over a fixed term. There are a few things to consider when deciding if this is the right mortgage for you:  

    • You’ll pay a lower interest rate than the SVR during the fixed term. 

    • If the SVR decreases, then so will your repayments. 

    • Early repayment charges can sometimes be lower than fixed-rate deals.

    Some discounted variable rate mortgages have an interest rate ‘floor’ or ‘collar’ that means your interest rate cannot fall below a certain percentage and may affect how much repayments can decrease.

Repayment Types

There are three different ways of repaying your loan. These are repayment, interest-only, and a combination of repayment and interest-only, known as Part & Part.

Please see below for further details on these repayment types.

  • Every month, your payments go towards reducing the amount you owe as well as paying off the interest (see Figure 1). This means that each month you're paying off a small part of your loan. Your annual statement will show your loan getting smaller.

    However, in the early years your monthly payments will mainly go towards paying off the interest, so the amount you owe won’t go down much at the start.

  • Your monthly payment pays only the interest charges on your loan – you don't pay off any of the loan amount. This means your monthly payments will be less than if you had a repayment mortgage. However, the total cost of an interest-only mortgage will be higher because you'll be paying interest on the full loan amount throughout the mortgage term.

    With an interest-only mortgage, you'll need to know from the start how you're going to find a lump sum to repay the loan at the end of the mortgage term. When you apply, we'll ask you to show us solid plans that should provide enough money to repay everything you owe by the end of the mortgage term.

  • It's possible to split a mortgage between repayment and interest-only. This means that at the end of the mortgage term you'll still have an amount of the mortgage to pay off, which you'll need to do using a lump sum.

    So, as with an interest-only mortgage, you'll need to make sure you have solid plans to repay this amount at the end of the term.

How a Mortgage Broker can help

Navigating the world of mortgages can feel overwhelming, but you don't have to do it alone. A mortgage broker is an expert who provides support every step of the way.

Benefits of using a broker:

  • Expert Guidance: We simplify complex terms and explain everything in a way that's easy to understand.

  • Access to More Deals: We can search thousands of mortgage products from a wide range of lenders to find the right fit for you.

  • Help with Your Application: We'll help you prepare your application and handle the paperwork, increasing your chances of success.

  • Support for Your Situation: Whether you have a small deposit or complex income, we have the experience to find solutions tailored to you.

Working with a trusted advisor provides the peace of mind that you're making clear, confident decisions on your path to home ownership.