Residential Mortgage Guide | A residential mortgage helps you buy or remortgage a home you plan to live in. This guide explains how residential mortgages work, how lenders assess you, and how to choose the right product for your needs. Use this residential mortgage guide to understand key terms, costs, lender rules, and when mortgage advice is most valuable.
What Is a Residential Mortgage?
A residential mortgage is a loan used to buy a home you plan to live in. The lender secures the loan against the property until the full balance is repaid. You make monthly payments over an agreed term. Most UK mortgage terms range between 25 and 35 years.
A residential mortgage can offer fixed or variable rates. A fixed rate keeps your payments predictable for a set period. A variable rate may change if interest rates move. You must meet lender affordability rules to qualify. Lenders assess your income, credit history, deposit size, and monthly financial commitments.
A residential mortgage is different from a buy-to-let mortgage. A buy-to-let product is for properties you rent to tenants. A residential mortgage must be used for your main home. Using the wrong mortgage type can breach lender rules.
Residential mortgages are suitable for first-time buyers, home movers, and individuals looking to remortgage. You can use them for houses or flats. You can also raise additional borrowing through a remortgage if allowed.
This guide helps you understand how residential mortgages work and what lenders expect. It also explains key terms and outlines the steps involved in the application process.
Key Terms You Must Understand
| Term | Definition | Why It Matters |
|---|---|---|
| Loan to Value (LTV) | LTV shows the loan size compared to the property value. A lower LTV offers better rates. | Lower LTV means lower risk for lenders and access to cheaper products. Most buyers save a 10% deposit. Some lenders allow 5%. |
| Fixed Rate Mortgage | Your interest rate stays the same for an agreed period. This creates predictable monthly payments. | Useful when you want stable budgeting and protection from rate rises. Fixes normally last two, three, or five years. |
| Variable Rate Mortgage | Your interest rate can change during the term. Payments may rise or fall. | Bills may change with the market. Tracker mortgages follow the Bank of England base rate. Standard Variable Rates vary by lender. |
| Repayment Mortgage | You repay interest and the loan amount each month. This reduces the balance over time. | Most residential buyers choose repayment because the loan gradually clears. This lowers long-term risk for lenders. |
| Interest-Only Mortgage | You pay interest only. You must repay the balance at the end of the term. | You need a repayment plan, such as savings or investments. Lenders apply strict checks for interest-only cases. |
How Lenders Assess Your Application
Lenders use strict checks to confirm you can afford your mortgage. They assess your income, credit record, deposit, and spending. These checks help them measure risk and decide the rate they offer you.
Income and Employment
Lenders check your income to confirm your repayment ability. They review payslips, P60 forms, and bank statements. They also assess your job type and contract stability. Permanent roles often give stronger results. Self-employed applicants must supply tax returns and annual accounts. Contractors may need contract evidence for their income. Stable and consistent earnings support stronger applications.
Credit History
Your credit history affects your mortgage options. Clean credit improves your rates and lender choice. Missed payments reduce your options and increase risk. Lenders check your credit report for defaults, CCJs, and arrears. They also check how you manage credit cards and loans. A strong score shows responsible financial behaviour.
If you need specialist support, visit our Bad Credit Mortgages UK page.
Deposit Size
A larger deposit lowers the lender’s risk. A higher deposit also improves your mortgage rate. Most lenders want at least 5 per cent. A 10 per cent deposit unlocks more lenders. A 15 or 20 per cent deposit provides even better deals. Larger deposits create lower LTV ratios, which strengthen your application.
Affordability Checks
Lenders complete detailed affordability checks on every residential mortgage application. These checks assess your income, spending habits, and existing credit commitments. Lenders review your bank statements to confirm your regular expenses. They also examine any loans, credit cards, or finance agreements you already hold.
Every lender uses a stress test to check future affordability. This test confirms you can afford higher payments if interest rates increase. The stress test protects you from future payment pressure and reduces the risk of arrears. Strong affordability improves your approval chances across most UK lenders.
You can review your own affordability using our guide here: Affordability Guide
Types of Residential Mortgages in the UK
| Mortgage Type | Description (SEO-Optimised, ≤20 words) | Best For | Key Benefits | Things to Consider |
|---|---|---|---|---|
| First-Time Buyer Mortgage | Helps new buyers enter the market with lower deposit options. | New buyers purchasing their first home. | Lower deposit, possible incentives, and guided advice for beginners. | Rates may be higher with small deposits. |
| Home Mover Mortgage | Supports buyers moving home and may allow mortgage porting. | Homeowners looking to buy a new property. | Possible porting, flexible options, tailored to changing needs. | Porting depends on lender approval and criteria. |
| Remortgage Product | Let’s you switch to a new deal when your fixed rate ends. | Homeowners seeking lower rates or new terms. | Lower payments, raise funds, avoid standard variable rates. | Early repayment charges may apply. |
| Additional Borrowing | Allows borrowing more against your home with lender checks. | Homeowners needing funds for specific purposes. | Access to equity, structured repayment, and controlled costs. | Affordability checks and higher rates may apply. |
For more details on residential products, see: Our Range of Residential Mortgages
Mortgage Process
| Step | Title | Optimised Description |
|---|---|---|
| 1 | Initial Planning | Check your credit score and review your income. Set a realistic deposit budget. Confirm your monthly affordability. Gather bank statements and payslips. |
| 2 | Decision in Principle (DIP) | A lender reviews your basic details. They check credit files and confirm your initial eligibility. A DIP helps you view properties with confidence. |
| 3 | Full Mortgage Application | You submit all required documents. Your broker or lender checks your identity and income. You complete the full application form. |
| 4 | Property Valuation | The lender reviews the property value to ensure it matches the price. They assess property condition and suitability for lending. |
| 5 | Mortgage Offer | The lender issues a formal offer once all checks pass. The offer confirms your rate, term, and mortgage conditions. |
| 6 | Completion | Your solicitor completes contracts and final checks. Funds are released to the seller. You receive your keys and become the legal owner. |
For expert help at any stage, use the directory: Find a Residential Mortgage Broker
Mortgage Costs and Fees
Arrangement Fee
Lenders may charge a product fee. Some allow this to be added to the loan.
Valuation Fee
This covers the lender’s property assessment.
Legal Fees
Your solicitor handles the legal work and charges a set fee.
Broker Fees
Some advisers charge a fee. Others are fee-free. Always ask before you proceed.
When Mortgage Advice Is Most Valuable
Mortgage advice is most valuable when your decisions carry greater financial risk. A broker provides expert guidance when your situation needs careful assessment. Their knowledge helps you avoid delays, failed applications, and costly mistakes.
Advice is invaluable when your circumstances are complex. You may need support if you have poor credit, unusual income, or limited deposit funds. A broker can check lender rules and find suitable products for your needs.
Mortgage advice also adds value when comparing many lenders. Each lender uses different criteria, which can cause confusion for buyers. A broker compares rates, fees, and affordability rules in one review.
You should seek advice if you are self-employed or own several income sources. Lenders assess these cases differently. A broker ensures your documents match lender expectations.
Advice is useful when you need fast approval. Brokers know which lenders offer quicker decisions. This helps when you face time pressure or specific deadlines.
You benefit from advice if your property type is unusual. Some lenders restrict lending on flats, ex-local authority homes, or non-standard construction. A broker can guide you to the right lender.
For expert help, use our directory to find an FCA-authorised adviser: Find a Residential Mortgage Broker
Thank you for reading our publication “Residential Mortgage Guide UK | What You Must Know | What Advisers Do & Why It Matters.” Stay “Connect“-ed for more updates soon!
Residential Mortgage Guide – FAQ
| Question | Answer |
|---|---|
| How much deposit do I need? | Most buyers need at least 5 percent. A 10 percent deposit offers wider options. |
| Can I get a mortgage with poor credit? | Yes. Specialist lenders may help. Rates may be higher. |
| How long is a typical mortgage term? | Most UK terms range from 25 to 35 years. |
| Do I need a broker for a residential mortgage? | A broker simplifies the process and finds suitable lenders. They save you time and stress. |
| What documents will I need? | You need ID, payslips, bank statements, and proof of deposit. |
| How do lenders check affordability? | Lenders review income, expenses, debts, and credit. They also stress-test higher future interest rates. |
| What affects my mortgage interest rate? | Rates depend on credit score, deposit size, income, lender risk, and the Bank of England base rate. |
| Can I get a mortgage if I am self-employed? | Yes. You may need two years of accounts, tax returns, and stable income evidence. |
| What happens if my valuation is lower than expected? | You may need a higher deposit or a new deal. Some buyers renegotiate the purchase price. |
| Can I overpay my mortgage? | Most lenders allow limited overpayments. Overpayments reduce interest and shorten your term. |
| How long does a mortgage approval take? | Approval takes one to six weeks. Delays depend on valuation times and document checks. |
| Can I switch lenders when remortgaging? | Yes. Many borrowers switch lenders to secure better rates or raise funds. |
| What fees should I expect? | Typical fees include arrangement, valuation, legal, and broker fees. Some deals are fee-free. |
| What is a Decision in Principle? | It confirms your borrowing estimate. It helps you make offers with confidence. |
| Do I need life insurance with a mortgage? | It is not required by law. Many buyers use insurance for family protection. |
| What is LTV in a mortgage? | LTV compares your loan to the property value. A lower LTV gives better rates. |
| Can I buy with a gifted deposit? | Yes. You need a gifted deposit letter confirming the funds are not repayable. |
| Can I borrow more later? | Yes. You can request additional borrowing or a further advance. Affordability checks apply. |