Last Updated: February 13, 2024
Homeownership is widespread in the UK, and, in most cases, getting a mortgage is the only way to buy a home. If you’re among those who plan on buying a home, this article presents essential information on how to get a mortgage. Our guide also addresses the different kinds of mortgages and mortgage rates and tips to improve your chances of getting approved.
Types of Mortgages
Before applying for a mortgage, consider the different types available and choose the one that best suits your needs.
The two main kinds of mortgages include:
The interest rate on these mortgages remains the same for the duration of the agreement, which typically ranges between one and five years.
- Advantage: The monthly repayment doesn’t change if interest rates go up.
- Disadvantage: The repayment stays the same even if interest rates go down.
If you get a mortgage with variable rates, the interest rates will fluctuate during the repayment period.
- Advantage: When interest rates decrease, the monthly payment goes down.
- Disadvantage: When interest rates increase, the monthly payment goes up.
Sub-types of mortgages include:
- Discount mortgages: A discount is applied to the standard variable rate (SVR) for a limited period.
- Tracker mortgages: These mortgages track the interest rate from another source—typically the Bank of England.
- Capped-rate mortgages: With this mortgage, the interest rates are capped; they cannot rise above a certain amount.
- Offset mortgages: These mortgages are linked to your savings account balance, which is used to reduce the amount of interest.
The mortgage process is different if you’re buying a home for the first time; it can affect the type of mortgage you get.
- First-time buyer mortgages: These are only available to first-time buyers and have a high loan-to-value ratio (LTV) but require only a 5% or 10% down payment.
- Guarantor mortgages: These mortgages allow you to buy a property with only a small deposit or no deposit if a friend or family member signs as a guarantor.
These are the mortgage types you need to be conscious of. How to get the right mortgage to fit your needs depends on your situation and plans.
|DID YOU KNOW? Mortgages are secured loans that use a property as collateral. But if you don’t make your repayments on time, the property will be repossessed.
What Are Mortgage Rates Like in the UK?
Mortgage rates are the interest rates charged on mortgages determined by lenders and the base rate decided by the Bank of England.
The current base rate is 0.1% (the lowest it’s ever been), causing interest rates to decrease and creating cheap mortgage deals.
How to Get a Mortgage in the UK With Low-Interest Rates
Interest rates play a deciding role in how much you can borrow. Lenders want to ensure that you can afford the payments, even if the rates rise by 3%. Fortunately, interest rates in the UK have gone down in the past five years and range from 1.68% to 2.58% for a 10-year fixed rate.
The deposit, however, plays a significant role in determining interest rates—the larger the deposit, the lower the payments. So how do I get a mortgage? The best course of action is to save a substantial amount of money. Those who put down at least a 40% deposit of the total value as a deposit get the best deals. So make sure you save enough before you apply.
|DID YOU KNOW? When buying a house in the UK, besides saving for a deposit, you need to research the area where you want to buy a house, compare market prices, select a property you can afford, and make an offer.
How to Get a Mortgage in the UK
Once you’ve found a home you like, you can apply for a mortgage. But before you do so, there are several matters you need to consider before beginning the application process.
Who Can Get a Mortgage in the UK?
To be eligible for a mortgage, you must have permanent full-time employment—meaning that freelancers and the self-employed have slimmer chances of being approved due to the lack of job security.
The mortgage process in the UK is speedier for those who have lower monthly expenses or no dependents. But those with significant debt can have their applications rejected, regardless of their income.
Although the process can be more complicated, foreigners can also obtain a mortgage in the UK. It helps if this person has been a UK resident for at least two years and has a permanent job and bank account in the UK.
How Old Do You Have to Be to Get a Mortgage?
To apply for a mortgage in the UK, you must be at least 18 years old. Lenders are not permitted to deny approval based on age (18 or older), as long as they prove that they can fulfil the monthly repayments. Those close to retirement can be offered shorter-term mortgages but need to put down a more substantial deposit when buying a home. The mortgage repayment period needs to expire before turning 80. So younger people have a better chance of being approved for longer-term mortgages.
How Much Do You Need to Earn to Get a Mortgage?
Income is the most crucial factor in obtaining approval for mortgages or any other type of loan. Anyone applying for a mortgage or home loan must provide proof of earnings. For mortgages, lenders are typically willing to lend a sum that amounts to four times your income. So, for example, if you earn £30,000/year, the maximum amount you could be approved for is £120,000.
If you wish to apply for shared ownership, the lender will look at the total household income. But in some cases, lenders multiply the total income by three instead of four. So how much do I need to earn to get a mortgage? You’ll need to make at least £30,000/year for a modest mortgage.
Does Credit Score Matter?
A credit score does matter. The lender needs your score to understand how much debt you have and if you’ve been making regular payments on your loans. So before applying, you need to get a credit report that contains all the necessary information. If you have a poor credit history, getting approved will be more challenging.
|DID YOU KNOW? Passive income is an excellent way to supplement your primary income. This can help you save the money for a down payment on your mortgage and assist you in becoming a homeowner.
|The two main mortgage types are fixed-rate and variable-rate mortgages.
|Interest rates in the UK are experiencing a record low—from 1.68% to 2.58%.
|Getting a mortgage is possible for anyone over 18 and under 80.
|It takes two to four weeks for a mortgage application to be approved.
|The maximum amount you can borrow is your annual income multiplied by three or four.
How to Apply for a Mortgage
You may continue to ask: How do you get a mortgage? And what do you need to get a mortgage? First, of course, the most critical part of obtaining a mortgage is the application process. But there are several steps to take before the mortgage application.
- Obtain a credit report: There are three leading credit reference agencies in the UK that you need to contact to get a report.
- Get an Agreement in Principle (AIP): Based on your income and credit score, this Promise tells you how much you can borrow.
- Choose a mortgage type: Choose a type that fits your requirements. (You have plenty of options.)
- Get a mortgage illustration: This key facts illustration shows the interest rate on the mortgage you’ve selected, the repayment period and conditions, and any additional fees.
After going through these steps, decide if you wish to apply online, by phone, or directly at a bank or building society. (You can also seek the help of a mortgage adviser for all of these steps.)
The next step is to gather all the following necessary documentation.
- Payslips from the past three months
- Proof of UK residency
- Annual summary of taxes from employer (P60)
- Bank statements from the past three to six months
- Proof of received insurance benefits or UK pension
- Current utility bills
- Household cash flow statement(s)
- Tax returns for the past two years
- Passport or another form of identification
Once you’ve collected these documents and submitted your application, all you need to do is wait to be approved.
How Long Does Mortgage Approval Take?
How long does a mortgage application take, including approval? There’s no hard-written rule about how long it takes to have your mortgage application approved. But in most cases, you’ll need to wait between two and four weeks to receive a mortgage offer—if nothing is missing in the application. A mortgage application takes a while to be processed since it requires numerous checks and a lot of information processing.
And how long does the offer last? Most offers are valid for three months, but some last up to six months.
You can, however, speed up the process by hiring a mortgage broker who’s well-versed in the market and knows each lender’s specific criteria.
|DID YOU KNOW? The average mortgage debt is £137,934 per UK household. The amount of debt has increased in the past decade, as people take out larger mortgages to afford a home at the rising property prices on the UK market.
Tips to Boost Your Chances of Getting a Mortgage
If you think your chances of being approved for a mortgage are slim, the following tips will help you improve your odds of buying a home.
Get Rid of Debt
Debt can be the death of your application. Before submitting a mortgage application, pay off as much of your debt as you can. If you can’t pay it all off, try reducing it to a minimum and make sure you close any non-essential credit cards.
Put Down a Substantial Deposit
How long does it take to get a mortgage? Keep in mind that the amount of your initial deposit plays a prominent role in the approval rate and speed of the process. The larger the down payment, the better the conditions—so save for a few years before applying.
Don’t Switch Jobs
How can I get a mortgage? First, the lender wants to know you have stable employment with regular income flow for a modest length of time. So don’t switch jobs immediately before applying for a mortgage. Before applying, you need to be employed at your current job for at least three to six months.
Get on the Electoral Register
If you’re not a high-earner, you may be wondering how to get a mortgage on a low income. You could improve your chances by registering on the electoral register. Lenders typically check if you’re registered to vote at your current address—a tried-and-true strategy for confirming someone’s identity.
|DID YOU KNOW? Mortgage brokers work for commission or a procuration fee. The usual amount they receive is 0.35% of the total loan amount – this is paid by the lender.
How Much Money Can You Borrow?
What do I need to get a mortgage? The UK mortgage system regards each borrower as unique. Some lenders are willing to offer more substantial loans than others, but they all consider three primary factors: household income, property value, and affordability. Considering these factors, in general, the amount you’ll be approved for is three or four times your annual income; it’s unlikely that you’ll be approved for more.
|DID YOU KNOW? Affordability assessments are conducted before you’re approved for a mortgage. Lenders look at the amount you earn and your expenses to assess how much you can afford to pay per month.
Taking on a mortgage entails a serious commitment. So before you apply for one, consider all the stages of the mortgage process. Even though the process might seem long and arduous, obtaining a mortgage is often the only way to become a homeowner.
If you’re employed full-time and have a saved deposit and good credit score, you should qualify for a mortgage.
When asking how to get a mortgage, keep in mind that lenders ask for payslips, bank statements, tax returns, proper ID, and utility bills to approve your mortgage application.
You can be declined if you have a poor credit history or have missed or been late on any of your loan payments. It also doesn’t bode well for you if you’ve submitted many credit applications in a short period.