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Mortgage Applications

The expert guide to UK mortgage applications - how they work, what documents you need, and why accuracy matters!

Mortgage Applications

If you've never applied for a mortgage before or are unsure how the process works, we're here to help!

This guide explains all the basics about mortgages applications, and how it all works. For help finding your ideal mortgage, and with support throughout the application process, contact Revolution on 0330 304 3040, or drop us a message at [email protected].

How Do UK Mortgages Work?

A mortgage is a loan secured against your property taken out to purchase a home. Most mortgages last for around 25 years, although they can be up to 40 years.

Given that the loan is secured against the property, if you don't keep up with your repayments, the lender can repossess the home. That means they take ownership of the property and sell it to recoup their money.

To get a mortgage, you need to go through an application process. You apply for the cash you need to buy the property, and the lender charges interest on top. These are combined and repaid as:

  • A repayment mortgage, with a monthly payment with a proportion to pay back the capital loan, and a proportion to cover the interest charged. When the term ends, you have paid all of the original loan back, plus all of the interest, and own your home outright.
  • An interest-only mortgage. That means each month, you make a smaller payment, but it is only the interest element, and none of the original loan is repaid. When the term ends, you still owe the initial loan value.

Can Anybody Get a Mortgage?

It depends. Lenders assess every application based on things like your income, the home you want to buy, what deposit you have available, and how old you are.

You can apply in several ways:

  • Directly to a bank or mortgage provider - although you are limited to only those products they sell.
  • Through an independent broker. This option means you have access to every deal on the market and can apply to the lender most likely to approve your application and with the most competitive deals.

What are the Different Types of Mortgage Product to Choose From?

There are many mortgage products, and it's essential to know how they work before making a long-term financial decision.

The list below shows the most common types of UK mortgage:

  • Standard variable rate mortgages (SVR) means that you pay standard interest rates and don't benefit from any fixed-rate discounts. The monthly payment can go up and down depending on the bank base rate, and you can usually transfer to another provider without paying exit fees.
  • Discount mortgages charge interest on the SVR rate but with a discount. These usually run for between two and three years.
  • Capped mortgages also rely on the SVR but with an upper limit on the interest chargeable.
  • Cashback mortgages offer incentives to take out a loan with a provider.
  • Fixed-rate mortgages have a fixed interest rate locked in. This rate is usually fixed for between two and five years, although it can be longer. Your monthly payment remains the same throughout the fixed term duration.
  • Flexible mortgages offer you the option to vary how much you pay per month, draw back out cash repayments already paid, make extra payments, or take a repayment holiday.
  • Joint mortgages are held between two applicants, who apply together, are on the deeds, and own the property jointly.
  • Offset mortgages are linked to your savings, held with the same lender. Your cash savings are offset against the mortgage balance, and you only pay interest on the difference between your mortgage debt and your savings.
  • Remortgaging means paying back your mortgage by taking out a new mortgage with another lender.
  • Tracked mortgages mean that the lender varies the interest charged, like an SVR rate, but this is based on a fixed percentage over and above the base rate.
  • Unencumbered mortgages are available on properties where no other existing mortgage or charge is secured against the home.

What are the Best Mortgages for First-Time Buyers?

Increasingly, lenders offer help to first-time buyers to make it easier to get onto the property ladder. There are also government support schemes available, so it's best to consult a whole-of-market broker to advise on the best options for you.

Most first-time buyers need a 10-25% deposit, but other products are available with a lower down payment.

  • Gifted deposit mortgages allow a parent or close family member to pay the deposit for you.
  • Guarantor mortgages offset the risk by having a family member guarantee your mortgage - and make the repayments if you fall behind.
  • Help to Buy equity loans are a government scheme for first-time buyers whereby you can borrow up to 20% of the property value to use towards your deposit.
  • Low deposit mortgages are available from a deposit of just 5%.
  • Low start mortgages offer lower initial monthly repayments.
  • Shared Ownership mortgages are a way for you to buy a proportion of a home from the housing association and pay rent on the balance.

What is a Bad Credit Mortgage?

Millions of people end up with credit issues on their file for one reason or another, making it difficult to find a mortgage through a high street bank.

Bad credit mortgages are usually offered by specialist lenders and often only available through independent brokers.

Can I Get a Self-Employed Mortgage?

You can indeed. Self-employed mortgages work the same as a mortgage for an employed person.

The difference is that you will need to provide tax returns or filed accounts to demonstrate your average annual income and are best advised to consult a broker before applying since not all lenders offer favourable terms to self-employed applicants.

How do Buy to Let Mortgages Work?

A buy to let mortgage is available for landlords and investors who want to borrow the cash to purchase a property they will let out to tenants.

Most buy to let mortgages are interest-only, with the rental income needing to be sufficient to cover the monthly interest charge.

What are Second Home Mortgages?

Second-home mortgages are designed for applicants who already own a property. The affordability criteria tend to be stricter since the lender needs to know you can keep up with your existing and the new mortgage repayments.

How Does a Commercial Mortgage Work?

Commercial mortgages allow businesses to buy properties and premises, either to operate from or as a rental investment.

Is Development Finance a Type of Mortgage?

Not exactly, no. Development finance is a short-term loan, usually interest-only, and used by developers to finance the cost of construction or redevelopment.

The loan is usually released in stages as the development progresses, with an inspection and valuation at each step before the cash is made available.

Bridging loans are another short-term loan and often used to quickly raise cash for a property purchase, for example, through a property auction.

Interest rates are higher, and most bridging loans run for a year. However, it is a viable option for buyers who can demonstrate their exit strategy and need the cash quickly.

What are Self-Build and New-Build Mortgages?

These two products are slightly different. Self-build mortgages are for applicants who want to borrow the funds to build their own property. Like development finance, the cash is released in pre-agreed stages following an inspection.

New build mortgages apply where a buyer wants to purchase a brand new development. This can be more complex, although if you are eligible for a government mortgage scheme, you will be more likely to be successful since most such initiatives are targeted at new-build developments.

Do UK Mortgage Providers Only Lend Against UK Properties?

Not necessarily! Applicants can take out an overseas mortgage to purchase a home abroad or a holiday home in another country.

You can also take out expat mortgages if you are a British national but live abroad. Expat mortgages are similar to domestic products, although the eligibility requirements can be much stricter.

What is a Second Charge Mortgage?

Second charges are additional loans secured against your home, in addition to a primary mortgage.

Some homeowners opt for a second charge mortgage as an alternative way to raise finance without having to remortgage - usually if they have an excellent interest rate on their existing mortgage or don't wish to incur exit penalties for switching to a new provider.

How Do Retirement Mortgages Work?

Retirement mortgages are usually available to applicants aged 55 or above and are designed to work around pension income.

Equity release mortgages are a different prospect:

  • Lifetime mortgages mean borrowing capital against the equity in your home. There are no repayments, but when you pass away or go into care, the lender will sell the property and recoup their lending plus interest.
  • Retirement interest-only mortgages work similarly, but you do pay the interest every month. That limits the total loan value reclaimable by the lender when they come to sell the property and increases the remaining cash value, which the estate will pass to your beneficiaries.

Professional UK Mortgage Advice

We hope this guide covers the essentials about how UK mortgages work. If you'd like to get started with an application, find out more about the type of mortgage best suited to your requirements, or compare the rates on offer, get in touch.

Mortgage advisors is wholly independent and available on 0330 304 3040 or via email at [email protected].

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