Question 1

How much deposit do I need for a UK mortgage?

Accepted Answer

Most UK lenders require a minimum deposit of 5-10% of the property price, though first-time buyers may access government schemes requiring as little as 5%. However, a larger deposit of 15-20% typically secures significantly better interest rates and lower monthly payments. The deposit percentage directly affects your Loan-to-Value (LTV) ratio - a key factor lenders use to determine your rate. For example, borrowers with a 20% deposit (80% LTV) often receive rates 0.5-1% lower than those with just a 10% deposit (90% LTV). Additionally, some lenders offer premium rates for deposits of 40% or more. Saving a larger deposit not only reduces your borrowing costs but also provides more choice among lenders.

Question 2

What is a good mortgage interest rate in the UK?

Accepted Answer

As of 2024, competitive UK mortgage rates range from 4-6% for fixed-rate mortgages, though rates fluctuate with the Bank of England base rate. Rates below 4.5% are considered excellent in the current market. Your actual rate depends on several factors: your LTV ratio (lower LTV = better rates), credit score, mortgage term, and whether you choose a fixed or variable rate. For example, a borrower with a 75% LTV and excellent credit might secure rates around 4%, while someone with 90% LTV might pay 5.5% or more. Two-year fixed rates are often cheaper than five-year fixes, but longer terms provide more certainty. Always compare rates across multiple lenders and consider using a mortgage broker to access exclusive deals.

Question 3

How does LTV affect my mortgage rate?

Accepted Answer

Loan-to-Value (LTV) is the percentage of the property price you are borrowing, calculated as (loan amount ÷ property price) × 100. LTV is one of the most important factors determining your interest rate because it represents the lender's risk. Lower LTV means you have more equity and are less likely to default. Lenders typically offer rate bands: under 60% LTV gets the best rates, 60-75% LTV is very competitive, 75-85% LTV receives standard rates, and above 85% LTV faces higher rates. The difference can be significant - moving from 90% LTV to 75% LTV might save you £100-200 per month on a £250,000 mortgage. This calculator shows your LTV ratio with color-coded indicators to help you understand your position.

Question 4

What is the maximum mortgage term in the UK?

Accepted Answer

The maximum mortgage term in the UK is typically 40 years, though most lenders offer terms between 25-35 years. Longer terms reduce your monthly payments but significantly increase the total interest paid over the life of the mortgage. For example, a £200,000 mortgage at 5% over 25 years costs £1,169 per month (£150,700 total interest), while the same mortgage over 40 years costs £966 per month but £263,680 total interest - over £112,000 more. Longer terms can help first-time buyers afford monthly payments but should be balanced against total cost. Many borrowers choose shorter terms (15-20 years) to save on interest if they can afford higher monthly payments. Your age also affects available terms, as lenders typically require mortgages to be repaid by age 70-75.

Question 5

Can I make overpayments on my mortgage?

Accepted Answer

Yes, most UK mortgages allow overpayments, but limits and charges vary by lender and mortgage type. The standard allowance is 10% of the outstanding balance per year without penalty, though some lenders allow more. Making regular overpayments can dramatically reduce both your mortgage term and total interest paid. For instance, overpaying £200 per month on a £270,000 mortgage at 5.5% over 25 years could save approximately £38,000 in interest and clear the mortgage 3-4 years earlier. However, check your mortgage terms carefully - exceeding the overpayment limit may incur early repayment charges (ERCs) of 1-5% of the overpaid amount. This calculator shows the impact of overpayments and warns if you exceed typical limits. Tracker and variable rate mortgages often allow unlimited overpayments without penalty.

Question 6

What are early repayment charges?

Accepted Answer

Early repayment charges (ERCs) are fees lenders charge if you pay off your mortgage early or overpay beyond the allowed limit, typically during a fixed-rate period. ERCs compensate lenders for lost interest and usually range from 1-5% of the outstanding balance, decreasing over time. For example, a mortgage might charge 5% ERC in year 1, 4% in year 2, reducing to 1% in year 5. On a £250,000 mortgage, a 3% ERC would be £7,500 - a substantial penalty. ERCs typically only apply during the initial deal period (usually 2-5 years); once you move to the lender's standard variable rate, you can usually repay without penalty. Always check your mortgage offer for ERC details before making large overpayments or remortgaging. Some mortgages have no ERCs but may offer less competitive rates.

Question 7

How much can I borrow for a UK mortgage?

Accepted Answer

UK lenders typically allow you to borrow 4-4.5 times your annual gross income, though some may offer up to 5-6 times for high earners or certain professions. However, borrowing capacity depends on affordability assessments that consider your income, existing debts, living costs, and future interest rate rises. For example, someone earning £50,000 might borrow £200,000-£225,000, but monthly debt payments of £500 could reduce this significantly. Couples combine their incomes - two earners on £35,000 each could potentially borrow £315,000-£350,000. Lenders stress-test affordability by calculating if you could still afford payments if rates increased by 2-3%. Self-employed applicants often need 2-3 years of accounts and may face stricter criteria. Use this calculator to determine realistic monthly payments before applying.

Question 8

What is an amortisation schedule?

Accepted Answer

An amortisation schedule is a year-by-year breakdown showing how your mortgage payments are split between principal (paying off the loan) and interest charges. In the early years, most of your payment goes toward interest, with only a small portion reducing the principal. Over time, this reverses - by the final years, most of your payment reduces the principal. For example, on a £270,000 mortgage at 5.5% over 25 years, year 1 payments include approximately £14,800 interest and £5,000 principal, while year 25 includes just £900 interest and £18,900 principal. Understanding your amortisation schedule helps you see equity build-up and plan overpayments strategically. This calculator generates a complete schedule showing your exact principal and interest breakdown for every year, which you can export to CSV for analysis.

Year	Opening Balance	Principal Paid	Interest Paid	Closing Balance
1	£270,000.00	£5,175.66	£14,720.82	£264,824.34
2	£264,824.34	£5,467.60	£14,428.88	£259,356.74
3	£259,356.74	£5,776.02	£14,120.46	£253,580.72
4	£253,580.72	£6,101.83	£13,794.65	£247,478.88
5	£247,478.88	£6,446.03	£13,450.45	£241,032.86

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