Mortgage in the UK – questions and answers (Part 1)

Buying a home is an important decision, so it helps to prepare carefully. This article answers common questions about the process. You can also read UK mortgage – questions and answers (Part 2).

There are many details to consider when buying a home. Here we cover the essentials, but individual circumstances and lender criteria can make a material difference.

The answers below are general information, not a promise of a mortgage offer or an exhaustive guide. Seek advice if you are unsure how they apply to you.

Buying a house in the UK - questions and answers

What do you need to buy a home in the UK?

Buying a home with a residential mortgage usually means saving a deposit, showing that the repayments are affordable and meeting the chosen lender’s criteria. Lenders assess factors such as income, regular spending, credit history, residency and the property. Requirements vary between lenders and products.

• Evidence of income that the lender can assess;

• Affordable borrowing based on your income, commitments and other spending;

• A deposit where the product requires one, plus money for purchase costs;

• Documents supporting your identity, address, residency and source of deposit where requested;

• Evidence appropriate to your employment or business situation.

How much deposit do I need to buy a house in the UK?

Some residential mortgage products accept a 5% deposit, but this is not a universal minimum or a guarantee of eligibility. A larger deposit can give you access to different products, while affordability, the property and the lender’s criteria still matter. See MoneyHelper’s deposit guidance.

Keep the deposit separate from the additional fees that come with a purchase.

Buying a house in the UK without a deposit

Zero- or low-deposit mortgages can be available in limited circumstances, but availability and criteria vary. They may have affordability, property-type, location, age, rental-history or other restrictions, and they do not remove the need to pay purchase costs. Consider the risk of negative equity and check the full product criteria before relying on an option.

What is the cost of buying a house in the UK?

We mentioned above that buying a house or flat in the UK involves additional fees that you need to be prepared for. It is difficult to estimate precisely how much these will be, as every situation is different, but the following list of possible fees should prove very helpful.

The cost of buying a house or flat in the UK consists of:

• A deposit, where required by the mortgage product;

• A lender valuation fee, if the lender charges one. A lender valuation is not the same as a buyer’s survey;

• Product fee or mortgage administration fee, information on these fees is given in the key facts document or ESIS (European Standardised Information Sheet);

• A survey, if you choose one;

• Mortgage broker fee;

• Costs of conveyancing, charged by the solicitor responsible for verifying the legal status of the property and transfer of ownership;

• Property transaction tax. In England and Northern Ireland, Stamp Duty Land Tax (SDLT) applies. Eligible first-time buyers pay no SDLT on the first £300,000 and 5% on the portion from £300,001 to £500,000; relief is not available above £500,000. In Scotland, Land and Buildings Transaction Tax (LBTT) has a £145,000 ordinary nil band, rising to £175,000 for eligible first-time buyers. In Wales, Land Transaction Tax (LTT) has a £225,000 main residential nil band and no separate first-time-buyer relief. Eligibility, additional-property ownership and residency can affect the tax due.

• Buildings insurance, removal costs and other moving expenses.

For further information, please check out: The cost of buying a house and moving.

How long does it take to buy a house in the UK?

There is no guaranteed timescale. Mortgage processing, valuation, conveyancing, searches, the seller’s chain and local delays can all affect the process, so it is sensible to allow several months and avoid committing to a date too early. Legal stages also differ between the UK nations. You can read more in How long does it take to buy a house in the UK.

Is cash buying a house in the UK possible?

A cash purchase means buying without a mortgage; it does not normally mean paying in banknotes. You will still need conveyancing and checks on identity and the source of funds, and the money is normally transferred through the banking system.

What should you take into account when buying a house in the UK?

It all depends on your situation and priorities. Our clients who are planning to buy a house pay attention to, among other things:

• Floor space;

• Number of bedrooms and bathrooms;

• Presence of a bathroom on the ground floor;

• Status of the property (freehold or leasehold);

• Location of the property;

• The surrounding area, for example distance to the city centre, distance to schools and clinics;

• Garden.

It is also worth analysing the quality of the surrounding schools, the presence of parking spaces and the quality of the internet connection. We strongly recommend that you take notes for a week or two on what you like and what bothers you about your current place of residence. In this way, evaluating your new property will be much easier.

If you are considering a leasehold property, check the remaining lease term, ground rent if payable and service charges. Tenure arrangements vary, so confirm the actual tenure and costs for the property rather than assuming that every flat is leasehold.

How do I start buying a house in the UK?

To make your UK home buying experience easier, take care of the following first and foremost:

• Stable earnings;

• The opportunity to save money on a regular basis;

• Low debt;

• Creditworthiness and credit score.

Before you start choosing a property, consider whether your household finances are in good shape. Review both income and regular spending, including credit commitments and bills. Saving consistently can help you build a deposit and budget for purchase costs.

It can also help to check your credit file and, where appropriate, improve your credit history. A consumer credit score is not a mortgage decision: lenders make their own affordability and credit assessments.

What documents may be required for a mortgage application?

The documents a lender requests depend on your circumstances, income type and product. The following is a preparation list, not a nationwide minimum requirement.

Employed applicants may be asked for:

• Recent monthly or weekly payslips;

• Bank statements showing income and regular spending;

Self-employed applicants may be asked for:

• Tax calculations (SA302) and corresponding tax year overviews for completed tax years;

• Company accounts or business bank statements where relevant.

Limited company directors may be asked for:

• Tax calculations (SA302) and corresponding tax year overviews for completed tax years;

• Company accounts and business bank statements;

• Evidence of salary, dividends or other income.

Other evidence can include:

• Personal current account statement - 3 months back;

• Proof of address - for example, gas, electricity, water bill, Council Tax, credit card statement;

• Identity document - (passport, driving licence, identity card);

• Confirmation of deposit - savings account statement;

• A P60 where relevant.

The lender may ask for additional or different evidence, and the requested periods can vary. Check its current requirements before applying.

How much does a broker cost in the UK?

Broker fees and payment models vary. Some brokers charge a fee, some receive commission from lenders, and some use both. Before proceeding, ask for the actual fee or commission arrangement, when it is payable and the terms that apply if the application does not proceed. MoneyHelper explains ways to choose an adviser.

Common UK mortgage questions

Will UK interest rates fall?

Future interest rates are uncertain. Fixed, tracker and other variable mortgages can respond differently, so consider repayments you can afford now and under possible changes rather than trying to predict a cheaper purchase date.

Is it worth taking out a mortgage in the UK at the moment?

It depends on your circumstances. Avoid rushing a purchase solely because rates may move. If you are planning to buy, start by checking your affordability, deposit, credit position and likely purchase costs.

Are current property prices in the UK high?

There is no single answer for the whole UK. Compare the price with your income, mortgage repayments, local demand and the type of property you want to buy.

How much do you need to earn to buy a flat in the UK?

Even applicants on modest incomes may be able to get a mortgage, but it depends on deposit, debts, regular spending, credit history, property price and mortgage term. As a rough starting point, lenders often look at income multiples, but affordability checks are more detailed than a single salary number.

Is there a bank where it is easiest to get a mortgage?

There is no single easiest bank for everyone. Some lenders are more flexible with credit history, others with self-employed income, complex income or smaller deposits. The best lender depends on the risk profile of the application.

What if I want to leave the UK a few years after buying my house?

You may be able to sell the property or, if appropriate, let it out. Before letting, contact your lender and obtain its permission or an appropriate mortgage; consent or refinancing is not guaranteed. Consider any early-repayment charges if selling, plus the insurance, tax and country-specific landlord responsibilities that come with letting.

Is it worth making mortgage overpayments?

Overpaying can reduce the total interest you pay and may shorten the mortgage term. Before doing it, check whether your mortgage has an annual overpayment allowance or an early repayment charge.

We hope this information helps you prepare for buying a home in the UK. If you would like to discuss mortgage options for your circumstances, please contact us.