Guide to Mortgages and Deposits

About this guide

Understanding the different mortgage types and lender jargon can be daunting when buying a house, but we’re here to help. Compare My Move’s team of property experts have covered everything from the mortgage basics to what credit score you need for a mortgage in our in-depth mortgage and house deposit guide. 

Before applying for a mortgage and getting together your house deposit, you must first understand the mortgage basics. Our guide begins with a detailed look at what is a mortgage, from explaining what loan-to-value means, to how to apply for a mortgage, our team of experts cover everything. 

Once you have an understanding of what to expect with your mortgage, you must then explore the different types of mortgage and which one will suit you best. Throughout our mortgages and deposits guide, we will explore a range of mortgage types and their advantages and disadvantages, from offset mortgages to cashback mortgages. 

If you’re moving house or just looking to save some money on your mortgage payments, you might consider remortgaging as an option. In our mortgages and deposits guide, we will look at when is a good time to remortgage and whether changing lenders might help get you a better deal on your mortgage. 

Once you’ve read up about your options and learned what the best mortgage is for your situation, we’ll take an in-depth look at each type of mortgage to further help with your research. We begin by exploring standard variable rate mortgage, looking at how the rate is set all the way to when it’s best to be on a SVR. 

By having all the important information in one place, with a focus on what is a mortgage, the different types of mortgage, what is remortgaging and what is a standard variable rate mortgage, you will be fully prepared. Once you’ve completed this guide, we hope you’ll feel confident about mortgages and deposits. 

  • 1. What is a mortgage?

    A mortgage is a loan taken out to buy a house. Your mortgage will be secured against the value of the home you plan to buy. You pay the mortgage back in monthly installments with added interest until the full amount is paid off. The typical repayment period is 25 years, although you can get shorter or longer terms.

    Most people will need a mortgage to buy a house as it is a significantly large amount of money to borrow. There are many different types of mortgage that come with varying interest rates, too. 

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  • 2. What are the different types of mortgages?

    With so many different types of mortgages available, the legal and financial jargon, interest rates and small print, it is easy to feel lost and overwhelmed. With the help of our finance and property experts, we'll take you through the different types of mortgage available and break down what each of them offers.

    To help you begin your research, it's important to note that there are two main types of mortgage: Fixed-rate and Variable-rate. Don't forget to plan a realistic budget before completing a mortgage application as, if you don’t keep up with your mortgage repayments, the lender can potentially repossess your home.

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  • 3. What is a mortgage valuation?

    When applying for a mortgage, you will require a mortgage valuation to ensure the property is worth the amount you will be paying for it. Mortgage valuations do not provide an in-depth inspection of the building, instead, they will provide your lender with a rough valuation of the home, helping them uncover if you’ll be paying too much or too little. In some cases, you may also require a valuation if you’re applying to remortgage.

    A mortgage valuation is not a structural property survey. It mostly benefits the mortgage lender and will have limited scope to determine if the property is a viable form of security for the loan you’re applying for. It may uncover obvious, visible defects, but the inspection itself will be very brief.In this article, we will discuss what the valuation process involves, what your surveyor will be looking for as well as the average costs that are included.

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  • 4. What is remortgaging?

    Remortgaging is the process of switching your existing mortgage to a new deal. This is often a good way to find lower interest rates and better mortgage terms. Remortgaging can be done via your current lender or through a new lender. 

    Many people remortgage to either replace their existing mortgage with a better deal and lower interest rate, or to borrow money against their property. 

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  • 5. Standard variable rate mortgages

    A standard variable rate mortgage is a type of mortgage where the interest on your mortgage repayments is set at your lender’s standard variable rate (SVR).

    In this case, the interest rate you pay, and thus your monthly payments, can potentially increase or decrease each month. Although the lender’s SVR will be influenced by changes to the Bank of England base rate, the SVR is ultimately down to the lender’s individual discretion. 

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  • 6. Interest-only mortgages

    With an interest-only mortgage, you pay back interest each month and not capital. You’ll pay back the full value of your home at the end of the mortgage loan. This guide will explain what an interest-only mortgage is, how it works and what the advantages and disadvantages are. 

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  • 7. Guarantor mortgages

    A guarantor mortgage is when a family member becomes a guarantor and agrees to cover your mortgage payments if you’re unable to. It can help you secure a mortgage if you’re struggling to save for a deposit or have financial circumstances that may dissuade mortgage lenders. 

    Parents and family members often offer to help out when someone is struggling to get onto the property ladder. One way to do so is to become a guarantor for a mortgage. However, there are risks to consider when agreeing to this type of mortgage and so it’s a decision not to be taken lightly. This is why Compare My Move have worked with property and finance experts to create an article explaining what a guarantor mortgage is, how it works and what the pros and cons are. 

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  • 8. What are 95% Mortgages?

    A 95% mortgage is a type of mortgage that only requires a 5% deposit, meaning you will borrow 95% of the property price to purchase the home. These mortgages allow those who struggle to save a bigger deposit to get on the property ladder more quickly. This type of mortgage is especially helpful for first-time buyers but is available to anyone with good credit.

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  • 9. Zero-hour contract mortgages

    It is possible to be approved for a mortgage if you are working a zero-hour contract, however it can be more difficult. 

    Zero hour contract workers have no minimum hours or income and lenders will largely make their decision on your financial stability and some lenders won’t lend to zero-hour contract workers at all. 

    However, there are steps you can take to strengthen your mortgage application whilst on a zero-hour contract. 

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  • 10. Mortgages for over 50s

    As the retirement and living age is getting older in the UK, it is possible to get a mortgage when you’re over 50. In this guide, we will explain everything you need to know about getting a mortgage if you’re over 50, from the lending criteria to the types of mortgage. 

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  • 11. Saving for a mortgage deposit

    Creating and sticking to a budget is one of the best ways to save for a deposit. Take a look at your outgoings to see how much you’re left with each month after all essentials bills. 

    Boost your savings with savings accounts such as the Lifetime ISA and consider getting a second income. Flat sharing while you save can also be highly beneficial.

    Be sure to make a clear and achievable plan for how much you need to save and how you plan to do so. 

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  • 12. What credit score do i need?

    When it comes to getting a mortgage, there isn’t a particular credit score required by mortgage lenders. The higher your credit score, the more likely you are to be accepted for a mortgage. An excellent credit rating can make you eligible for a wider range of mortgages and better deals.

    Essentially, lenders want assurance that the person taking out the loan will be able to make their monthly repayments without issue. To ensure the person applying for the mortgage is financially responsible, lenders will run a credit check on the person. 

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  • 13. What are mortgage affordability checks?

    The largest amount most people can borrow is 4.5 times their annual income. Note that this is the maximum you can borrow – many people will only be eligible for much smaller loans.

    Mortgage lenders will consider the size of your deposit, your income, your outgoings and any factors such as debt that could affect how you pay back your mortgage. It’s important you are sure you can afford to pay your monthly mortgage payments along with other regular bills such as utilities, broadband and council tax.

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  • 14. How long does a mortgage application take?

    You will need to apply for a mortgage when you buy a house. The average time for a mortgage application to be processed is between 18 to 40 days, although it will vary for every home buyer. 

    In this guide, Compare My Move's experts explain the mortgage process, from application to acceptance, including how long each step will take. 

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  • 15. How long does a mortgage offer last?

    Once you have secured a mortgage, you have a limited time to complete the property purchase, usually 3-6 months from the time the mortgage is offered.

    We've reviewed the latest and most relevant information on mortgages to provide you with everything you need to know about the length of mortgage offers and what to do if your mortgage offer expires.

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  • 16. What is a mortgage agreement in principle?

    An agreement in principle (AIP) is a written estimate stating how much you may be able to borrow from a particular mortgage lender. It is not a formal mortgage offer or a guarantee. It is also referred to as 'a mortgage in principle', 'an approval in principle' and also 'a decision in principle'.

    With the help of our property and finance experts, Compare My Move have created this article to explain the purpose of an AIP and why it’s an important element of the house buying process.

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  • 17. What can stop you from getting a mortgage?

    If you don’t fit their lending criteria, it’s possible that your bank or building society could reject your mortgage application. The application will be assessed against your lender’s requirements to determine if you are fit to lend to. If you are declined, you did not meet this list of requirements. Every lender will assess their mortgage applications differently. However, no matter what the requirements, if your application is declined, it doesn’t mean you’re out of options. 

    Compare My Move work with experienced finance and property experts to ensure you’re provided with accurate and insightful guides that can help you through the moving process. In this article, we will discuss what factors can stop you from getting a mortgage and how you can prepare for the application process to reduce your chances of being declined.

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  • 18. What is a gifted mortgage deposit?

    A gifted mortgage deposit is a cash gift, usually from a family member, which will cover part of or all of the deposit for a house. Many first-time buyers rely on a gifted mortgage deposit to buy their first home.

    The experts at Compare My Move share their knowledge and advice on buying a house with a gifted mortgage deposit.

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  • 19. Mortgage interview questions

    A mortgage interview is arranged so that lenders can ensure that you qualify for a loan. In this meeting they will explore how much mortgage you can afford to take out and you will also be able to discuss the types of mortgages available to you.

    During you mortgage interview a lender will want to get an idea of your financial situation and employment status, looking into everything from your credit score to your spending habits.

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  • 20. Do i need a mortgage broker?

    A mortgage broker, or mortgage adviser, can be a huge benefit to potential homebuyers looking to secure a mortgage. Although it is not essential to hire a broker, their advice and knowledge could be invaluable. Your mortgage broker will work on your behalf to find the right lender for you, finding deals and interest rates that best suit your needs. 

    However, you may find this service comes with a fee and you should be aware of the role of a mortgage broker before proceeding. 

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