The anatomy of a mortgage
- Capital: the amount you borrow.
- Term: how long you take to repay — typically 25 years, increasingly 30–40. Longer terms mean lower monthly payments but far more total interest.
- Loan-to-value (LTV): the loan as a percentage of the property's value. A £180k loan on a £200k home is 90% LTV. Lower LTV bands unlock cheaper rates — which is why deposit size matters so much.
- Repayment vs interest-only: repayment mortgages clear the debt over the term; interest-only payments cover only interest, leaving the full capital due at the end — lenders require a credible repayment plan.
Rate types
| Type | How it works | The trade-off |
|---|---|---|
| Fixed | Rate locked for 2, 3, 5 or 10 years | Certainty; but early repayment charges if you leave during the fix, and you won't benefit if rates fall |
| Tracker | Moves with the Bank of England base rate plus a margin | Cheaper when rates fall; payments rise when they rise |
| Standard variable rate (SVR) | The lender's default rate after a deal ends | Usually the most expensive place to sit — drifting onto SVR is the most common silent money leak in UK households |
Run your own numbers
The mortgage repayment calculator shows monthly payments, total interest over the term, and what regular overpayments could change — every assumption stated.
What lenders actually assess
- Income and affordability: not just salary multiples — lenders stress-test whether you could still pay if rates rose.
- Outgoings and debts: childcare, loans, car finance and spending patterns all reduce borrowing capacity.
- Credit history: missed payments, defaults and even unused credit limits shape both approval and rate.
- Deposit/LTV: the band you land in (95%, 90%, 85%, 75%, 60%) often matters more than small rate differences between lenders.
Costs beyond the rate
Compare deals on total cost over the deal period, not headline rate alone: arrangement fees (often £999–£1,999, sometimes added to the loan — where they accrue interest for decades), valuation and legal fees, and early repayment charges. A lower rate with a big fee can cost more than a higher rate without one, especially on smaller loans.
Where advice fits
Most UK mortgage sales are advised — a broker or lender adviser must recommend a suitable deal. Mortgage brokers can be paid by commission from lenders, fees from you, or both; they must disclose which, and whether they search the whole market or a panel. The questions in our adviser-vetting toolkit apply to mortgage brokers exactly as they do to financial advisers — and every broker should appear on the FCA Register.
Common questions
Should I overpay my mortgage or invest instead?
What happens when my fixed deal ends?
Is my mortgage covered by the Ombudsman?
About this guide: general education only — not regulated advice, not a personal recommendation, and not a financial promotion of any lender or product. Your home may be repossessed if you do not keep up repayments on a mortgage. FinancialAdvisor.co.uk is not an FCA-authorised firm.