Essential Things to Know about Mortgages in the UK

When you think of investing in a home in the UK, you should know more about what you will need to do to secure a mortgage.  

If you are determined to buy a home in the country, these tips can help you understand the process better and learn how the mortgage system in the UK works.

The mortgage market in the UK

The gross mortgage lending in 2021 reached £315.95 billion. This is because the popularity of home ownership is higher in the UK compared to other European countries, and younger families always plan to buy a home. In the UK, several mortgage types are available from building societies and banks, and most offer mortgage loans payable in 25 years. Still, some also offer shorter or longer loan periods.

How do you qualify for a mortgage?

The UK does not impose legal restrictions on adults getting a mortgage. However, individual lenders have specific terms, and each one will likewise have its requirements. Therefore, it is better to find a mortgage advisor near you if you need advice. For example, if you reside in Kent, it is better to talk to a mortgage advisor Kent because they are more knowledgeable about the area and the state of the local market.

While the requirements might differ, the main factors lenders consider are the loan applicant’s age, job security and income, credit score, and inclusion in the electoral list.

Types of mortgages in the UK

If you are unfamiliar with the UK property market, the different mortgage types might overwhelm you. While there are two primary types, the industry offers many specialist types to fit various circumstances.

• Fixed-rate. This type of mortgage has fixed-rate interest for two or five years before moving to the standard variable rate (SVR) of the lender. The standard variable rate is higher; thus, most homeowners remortgage their property after the fixed-rate period. The payment terms are 25 years, 15 to 20 years, or 30 to 35 years.
• Variable rate. This is dependent on the general interest rate, so it fluctuates.
• Discount mortgages. This is a standard variable rate mortgage with a discount applied for a limited time (two to three years). 
• Tracker mortgages. Another SVR mortgage, but this one tracks the interest rate from another source, such as the Bank of England. 
• Capped rate mortgages. The interest rate is restricted on a variable rate mortgage, so it cannot go beyond the cap, but the offered rate may be higher.
• Offset mortgages. With an offset mortgage, your loan is linked to your savings account, so your loan balance is deducted from it. This type can reduce the loan interest amount, lower your monthly payments, or reduce the length of the payment terms. 

Mortgage lenders in the UK require various documents from loan applicants. Since the process can be confusing, consulting with an experienced mortgage advisor in your area is a practical decision. Knowledge of the property market is vital, but knowing how each mortgage lender works is crucial in maximising your investment.