UK Mortgages Explained: Everything You Need to Know

A mortgage is a long-term loan to buy a property, secured against that property. If you stop paying, the lender can repossess.

That’s the entire concept. Everything else is just terms and conditions. Here’s what actually matters.

How much can you borrow?

Most lenders cap mortgages at 4 to 4.5 times your annual income. Some go to 5x for higher earners. A couple earning £50k each can usually borrow around £400k–£450k.

But borrowing the maximum isn’t always the right call. Lenders check what you can afford on paper. You need to know what you can afford comfortably — with food, bills, holidays, and a savings buffer still intact.

A quick rule: your monthly mortgage payment shouldn’t be more than 30–35% of your take-home pay after tax.

How much deposit do you need?

The bigger your deposit, the cheaper your mortgage.

• 5% deposit (95% LTV) — possible, but rates are high. Good for first-time buyers with limited savings.
• 10% deposit (90% LTV) — much better rates kick in.
• 15% deposit (85% LTV) — rates drop noticeably again.
• 25%+ deposit (75% LTV or less) — you get the best rates available.

LTV means “Loan to Value” — what % of the price you’re borrowing.

Fixed vs variable: which one?

Fixed rate. Your interest rate is locked in for 2, 3, 5, or 10 years. Your monthly payment doesn’t change. Most UK buyers go fixed. Predictable, safe.

Variable / tracker. Your rate follows the Bank of England base rate (or your lender’s standard variable rate). When rates fall, you pay less. When they rise, you pay more.

For first-time buyers, a 2- or 5-year fix is the standard answer. Pick 5 years if you want maximum certainty, 2 years if you think rates will fall soon.

Repayment vs interest-only

Repayment. Each monthly payment chips away at the loan. By the end of the mortgage term (usually 25–35 years), you own the house outright. This is what 95% of UK residential mortgages are.

Interest-only. You only pay the interest each month. The original loan is still there at the end of the term and you have to pay it off in one go. Almost never used for residential. Mostly for buy-to-let.

Go repayment. Don’t overthink it.

Mortgage in Principle: do this first

A Mortgage in Principle (MIP, or AIP for Agreement in Principle) is a free, non-committal indication from a lender saying “based on what you’ve told us, we’d probably lend you up to £X.”

It takes about 24 hours, doesn’t affect your credit score (most lenders do a soft check), and lets you make offers as a “proceedable buyer.” Estate agents and sellers take you much more seriously with one.

Get an MIP guide here.

Broker vs going direct

Going direct to your bank is fine if you have a simple situation, good credit, and a normal income. You’ll get whatever that lender offers — no comparison.

Using a broker is worth it if you’re self-employed, have unusual income, want to compare 90+ lenders, or just don’t have the time. Good brokers are free to you (paid by the lender) or charge a flat £300–£600.

If you don’t know which to use, use a broker for your first mortgage. You’ll learn the process and probably save money.

What lenders look at

Roughly in order:

1. Income — payslips, last 2–3 years if self-employed
2. Outgoings — credit card debt, car finance, childcare, subscriptions
3. Credit history — anything missed in the last 6 years matters
4. Deposit source — gift, savings, inheritance, all fine; just need to evidence it
5. Employment status — permanent contracts are easiest, but contractors and freelancers can absolutely get mortgages

Tip: don’t open new credit cards or take out finance in the 3 months before applying.

What it costs

Most mortgages have:

• Arrangement / product fee: £0–£2,000 (often £999). You can usually add this to the loan, but you’ll pay interest on it.
• Valuation fee: £150–£400 (sometimes free).
• Broker fee: £0–£600 (often free).

Plus you’ll pay stamp duty on the property purchase itself — separate from the mortgage. (What a conveyancer does.)

What if your credit isn’t great?

You can still get a mortgage with imperfect credit, but you’ll pay more. Specialist “adverse credit” lenders exist. A broker will know who to approach.

The best thing you can do in the year before applying:

• Pay everything on time
• Don’t max out credit cards
• Stay at the same address
• Don’t apply for new credit unnecessarily

Check your credit report (Experian, Equifax, TransUnion — all free) and fix any errors.

How Woosh helps

We don’t lend. We connect you to vetted UK mortgage brokers and lenders, all from the same dashboard you’re using to browse and offer on homes. One login, one timeline, one place to track everything.

Get a Mortgage in Principle · Browse properties · How buying works