By clicking a retailer link you consent to third-party cookies that track your onward journey. If you make a purchase, Which? will receive an affiliate commission, which supports our mission to be the UK's consumer champion.
What is a mortgage?
Find out what mortgages are and the basics of how they work in our easy-to-understand guide.
A mortgage is a loan that you use to buy a property.
When you buy a home, you'll put down a cash deposit of at least 5% of the property's price, and then pay the remainder using a mortgage from a bank or building society.
You'll repay your mortgage in monthly instalments over a set period of time - for example 25, 30 or 35 years.
Ready to get a mortgage?
Find the right mortgage using the fee-free service provided by L&C Mortgages
If you click on the link and complete a mortgage with L&C Mortgages, L&C is paid a commission by the lender and will share part of this fee with Which? Ltd helping fund our not-for-profit mission. We do not allow this relationship to affect our editorial independence. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
What types of mortgage deals are there?
Most homebuyers take out repayment mortgages, where you pay back some of the loan and some interest each month.
The main alternative is an interest-only mortgage, where you just pay the interest each month then repay the sum you originally borrowed at the end of the mortgage term.
Within those two categories, there are several different types of deal you can choose from. The most common are:
You can get a broad overview of each in our guide on the types of mortgage, or click the links above to learn about the individual options in more detail.
How mortgage rates work
When you take out a mortgage, you'll usually pay the headline rate for a set number of years - most commonly two or five. This is known as the introductory or deal period.
Once this period ends, you'll be automatically moved on to your lender's standard variable rate, which is usually significantly more expensive. To avoid this, most borrowers switch to a new deal at this point. This is called remortgaging.
Which factors affect your mortgage options
Some important things that will affect your choice of mortgage, and the deals available to you, include:
If you're unsure about any of the above, consider talking to an independent mortgage broker, who will be able to advise on the best option for you.
How to compare mortgage deals
No matter what type of mortgage you go for, you'll have to pay interest on the loan. Despite this, you shouldn't choose a deal purely on the headline interest rate.
Other factors are at play, too. You'll usually need to pay a fee to set up the mortgage (this might be called an arrangement, booking, or completion fee). These fees are often highest on the mortgages with the cheapest rates.
It's also important to look out for things such as early repayment charges, and whether the mortgage can be transferred to another property (this is called porting a mortgage).
When you're ready to start viewing properties, estate agents might ask whether you have a mortgage agreement in principle (AIP).
Also known as a decision in principle (DIP), an AIP is a statement from a bank saying that it is, in principle, willing to lend you a certain amount of money, subject to full affordability checks being passed.
Having an AIP can help you show that you're able to access the funds and are a serious buyer. Check our guide on mortgage agreements in principle to find out more.
How long does a mortgage offer last?
When you apply for a mortgage and receive a formal offer from a lender, it will usually only be valid for a certain amount of time.
Most mortgage offers last for three to six months - although longer offers are sometimes available on new-build homes. If you don't complete your purchase in this time, you'll need to ask for an extension.
In some cases, this means you might have to go back through the bank's affordability assessments.
Be more money savvy
free newsletter
Get a firmer grip on your finances with the expert tips in our Money newsletter – it's free weekly.
This newsletter delivers free money-related content, along with other information about Which? Group products and services. Unsubscribe whenever you want. Your data will be processed in accordance with our Privacy policy
What is a mortgage broker?
Searching for a mortgage can be complicated. You could save time and money by using a mortgage broker: a professional adviser who can find and apply for a deal on your behalf.
Some mortgages are only available through brokers, but in other cases the opposite is true and you'll only get the deal if you apply directly yourself.
A whole-of-market broker should look at the entire mortgage market and recommend the right deal for you.
There's a lot of jargon in the world of mortgages and property. Look up the definitions of all the most commonly used terms in our simple jargon buster.
The overall cost of a mortgage, including the interest and fees.
This assumes you will have the mortgage for the whole term (rather than remortgage at the end of your deal period), so it might not be the most useful way to compare deals.
A setup fee for your mortgage. This is usually a flat upfront fee, but can also be charged as a percentage of the loan.
Most mortgage lenders will allow you to add the arrangement fee to your loan, but this will mean you pay interest on it for the whole mortgage term.
If you go into arrears, it means you have defaulted at least once on your mortgage repayments, ie you've missed a month's payment.
Contact your lender as soon as possible if you think you might go into arrears.
If your mortgage deal has a collar, your interest rate will not fall any lower than the figure specified.
Collars only apply on variable-rate mortgages, which go up or down depending on what happens to the Bank of England's base rate
ERCs are penalty fees that kick in if you pay off your mortgage (for example by moving home) during the initial deal period.
ERCs are most commonly found on fixed-rate mortgages with initial terms of five years or longer.
How much of the property that you own outright, ie your deposit plus the capital you've paid off on your mortgage.
A third party who agrees to meet the monthly mortgage repayments if you're unable to.
This is most common with first-time buyers, and the guarantor is usually their parent or guardian.