A guide to mortgages: your questions answered

Buying a home can feel like a lot to manage at once—viewings, offers, surveys, solicitors, and then the mortgage itself. A mortgage is usually the biggest financial commitment you’ll make, so it helps to understand the basics before you apply.

This guide explains the main moving parts of the mortgage process, the types of mortgages and interest rates you may come across, and the costs and checks that often get overlooked.

What is a mortgage?

A mortgage is a long-term loan secured against a property. The lender advances money to buy the home, and you repay that money over time.

If you do not keep up with repayments, the lender may be able to take steps to recover the debt, which can include repossessing the property.

Mortgages are commonly available on terms ranging from around 5 to 40 years (subject to lender rules and your circumstances). In general:

• Longer terms can reduce your monthly payment.
• Shorter terms can reduce the total interest paid over the life of the mortgage.

How much can you borrow?

Lenders carry out an affordability assessment to decide what they can lend you. They look at your income and your outgoings to estimate how much you can comfortably repay.

Affordability checks typically include:

• Your income (from employment, self-employment, or other sources)
• Your existing financial commitments (credit cards, loans, other mortgages)
• Your regular living costs
• Your credit history and how you manage credit

Many lenders also stress-test affordability using assumptions about interest rates, so the amount offered is not based purely on today’s rate.

The mortgage application process: DIP and full application

Mortgage applications are usually split into two stages.

Decision in Principle (DIP)

A DIP is an early indication of whether a lender may lend, based on information you provide. It is often computer-assisted and focuses on broad affordability and credit checks.

A DIP can be helpful when you are shopping around for a property, because it gives you a clearer idea of your likely borrowing range.

Full mortgage application

Once you have an offer accepted, the lender will require a full application. This is where the lender verifies details and checks supporting documents.

At this stage you can expect:

• Uploading or providing evidence such as payslips and bank statements
• A valuation of the property
• A human underwriter reviewing the case

If everything is satisfactory, the lender issues a written mortgage offer.

How do you repay a mortgage? (repayment types)

Most residential mortgages fall into two main repayment types.

Capital & Interest (repayment)

With capital & interest, each monthly payment includes both:

• Interest charged on the loan
• Capital that reduces the outstanding balance

Over time, the mortgage balance is paid down, and the loan is typically cleared by the end of the term.

Interest-only

With interest-only, your monthly payments cover interest only. The loan balance does not reduce during the mortgage term.

The capital must be repaid later, using a separate repayment strategy. For residential interest-only mortgages, lenders will usually want to understand and evidence how the capital will be repaid at the end of the term.

Interest-only mortgages can be more complex than repayment mortgages because the end-of-term plan becomes a key part of the overall arrangement.

Understanding mortgage interest rates

Mortgage products commonly come with different ways the interest rate is set and how it can change.

Fixed rates

A fixed-rate mortgage keeps your interest rate (and therefore your monthly payment) stable for a set period—often 2, 3, 5, or 10 years.

• Potential advantage: easier budgeting.
• Potential drawback: if rates fall, your payment may not reduce.
• Important point: early repayment charges can apply if you repay or switch during the fixed period.

Tracker rates

A tracker mortgage is linked to a reference rate (often the Bank of England Base Rate) plus or minus a margin.

• Potential advantage: payments can move in line with the reference rate.
• Potential drawback: if the reference rate rises, your payments can increase.

Discounted rates

With a discount, your rate is set below the lender’s standard variable rate for a defined period.

• Potential advantage: payments may be lower than the lender’s standard rate.
• Potential drawback: the lender controls the standard variable rate, so it may not follow base rate movements exactly.

Capped rates

A capped mortgage is variable, but the rate will not rise above a set maximum during the product period.

• Potential advantage: some protection against rate rises.
• Potential drawback: these products are less common and may be priced less competitively than other options.

Flexible mortgages (where available)

Some mortgages offer features such as overpayments, underpayments, or payment holidays (subject to terms).

• Potential advantage: can suit changing circumstances.
• Potential drawback: flexibility may come with a higher cost.

Offset and current account mortgages

With an offset mortgage, certain savings are used to reduce the interest charged on the mortgage balance (rather than paying interest on savings in the usual way).

• Potential advantage: may help reduce the interest you pay if you hold savings.
• Potential drawback: these products can have higher mortgage rates than standard alternatives.

Surveying and valuing your property

Before a lender offers a mortgage, they need to assess the property’s value and suitability as security.

Lender valuation vs your own survey

A lender’s valuation is primarily for the lender’s purposes. It may not provide the level of detail you would want as a buyer.

Many buyers choose a separate survey to understand the property’s condition and potential issues.

Common survey options include:

• Basic valuation (for lender security)
• House buyers survey (more detail for the buyer)
• Full building survey (often more detailed, commonly used for older or unusual properties)

Desktop valuations (AVMs)

Some lenders use automated valuation models (AVMs) that estimate value using data rather than a physical inspection. These can be quicker, but they are not a substitute for a detailed survey.

If you are concerned about the condition of a property, a physical survey can be the better way to get clarity.

What insurance might you need?

Insurance requirements can vary by lender and mortgage type, but there are a few common categories.

Buildings insurance

Most mortgage lenders require the property to be insured against damage to the building. This is typically a condition of the mortgage offer.

Life assurance

Some borrowers arrange life cover to help ensure the mortgage balance can be repaid if they were to die during the mortgage term.

Critical illness cover

Critical illness policies can pay out a lump sum if you are diagnosed with specified illnesses.

Income protection

Income protection is designed to provide regular payments if you cannot work due to illness or injury.

Insurance needs are personal and depend on your circumstances, so it’s important to consider what level of cover—if any—is appropriate for your household.

Remortgaging (switching lenders) basics

A remortgage is when you keep your property but change your mortgage—either with your current lender or a new one.

Key points to consider include:

• Early repayment charges if you leave your existing deal before it ends
• Timescales, as remortgages still involve legal work and lender processes
• Whether the new mortgage changes the term or repayment type

Remortgaging usually requires a solicitor or legal adviser to manage the legal transfer and completion steps between lenders.

Stamp Duty and other common costs

Mortgage costs are only part of the picture when buying a home. Stamp Duty Land Tax (SDLT) and other fees can significantly affect your budget.

Stamp Duty Land Tax (SDLT) – England & Northern Ireland

SDLT is generally payable on property purchases above certain thresholds and is calculated in bands.

First-time buyers may qualify for relief, but the rules depend on the purchase price and other factors.

There can also be additional charges for second properties, and stamp duty rules can apply differently where ownership changes.

Land and Buildings Transaction Tax (LBTT) – Scotland

In Scotland, stamp duty is replaced by LBTT, with its own rate bands and rules.

Land Transaction Tax (LTT) – Wales

In Wales, stamp duty is replaced by LTT, again with different rate bands and rules.

Other costs to budget for

Depending on your situation, you may also need to consider:

• Solicitor fees
• Survey fees (if you arrange your own)
• Mortgage-related fees (where applicable)
• Removal costs
• Any fees connected to the legal process

The role of solicitors in a property purchase

When you buy a home, you will need a solicitor (or licensed conveyancer) to handle the legal side of the transaction.

A solicitor typically:

• Carries out searches to identify issues that could affect the property
• Reviews and prepares the contract
• Manages the process through exchange of contracts
• Coordinates completion, including transferring funds and releasing keys

In many cases, the solicitor also acts for the lender as part of the lender’s requirements, which helps ensure the lender’s interests are protected.

Common mortgage questions home buyers ask

Can I get a mortgage before I find a property?

Many buyers start with a DIP so they have a clearer idea of what they could borrow before making an offer.

What happens if the valuation comes in lower than expected?

If the lender’s valuation is lower than the purchase price, it can affect the mortgage amount the lender is willing to offer. This may require negotiation with the seller or a change to the deposit.

Are fixed rates always the best option?

Not necessarily. Fixed rates can offer stability, while variable options may suit borrowers who are comfortable with payment changes. The “best” choice depends on your priorities and risk tolerance.

Final thoughts

A mortgage isn’t just about choosing a rate—it’s about understanding the repayment structure, the way interest rates can change, the valuation process, and the wider costs that come with buying a home.

Having a clear picture of how the mortgage journey works can make the process feel more manageable, whether you’re a first-time buyer, moving home, or remortgaging.