A guide to UK Residential Mortgages

Residential mortgages in the UK allow potential home owners with insufficient funds to buy property outright, to borrow money to buy a home.

Buying your own home or moving home can be a thrilling and delightful experience. However, buying your own home as a first time buyer or buying another home and perhaps moving up the housing ladder to a more expensive residential property requires either using your existing financial resources (or the financial resources of family or friends) or taking out a residential mortgage.

A residential mortgage is a loan against the value of your home. This means that as long as you continue to pay the installments on your residential mortgage on the due dates, according to the repayment plan agreed with your mortgage lender, you are unlikely to encounter any problems. You will be able to live there and be able to benefit from any increase in the value of your property. Inevitably, your home is at risk if you are unable to maintain the payments on your residential mortgage.

Residential mortgages are paid off by affordable monthly installments over many years, according to a plan that is agreed with the mortgage lender when the residential mortgage is taken out initially.

Interest is payable on the sum that remains outstanding during the course of the residential mortgage which is typically between 15 and 25 years. However, residential mortgages over more than 25 years are not unknown, especially in locations where house prices are relatively high. In addition, it is not unusual to change mortgage products or mortgage providers over the life of the residential mortgage as the mortgage market, the housing market or individual circumstances change.

Individuals who are seeking to take out a residential mortgage have a series of impotant decisions to make about the nature and characteristics of their mortgage. In broad terms these are:-

Repayment mortgage or Interest Only Mortgage

Should mortgage interest be based on a Variable Rate, Fixed Rate or Capped Rate

Should the mortgage be obtained from a Bank, Building Society, or a specialised lender

and the ways an Independent Financial Advisor (IFA) may help with these decisions.