What’s a mortgage?

Everything you need to know about borrowing to buy a property

For most of us, a mortgage is absolutely essential when it comes to buying a home. 

Without one you’d need enough cash to buy a property outright, and that’s unlikely.

These loans are larger than your typical loan and long-term – but this is all par for the course when it comes to property ownership.  

So what is a mortgage and how does it work?

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Mortgages explained

In short, a mortgage is a specific type of borrowing that helps you buy a home. The main difference between a mortgage and another type of loan is that the lender uses your property as security for the loan. This means that if you can’t keep up with your repayments, the lender may repossess the property to try and get its money back – which isn’t the case with other loans.

By taking your property as security for the loan, mortgage providers can typically offer better interest rates than other types of borrowing due to the reduced risk. However, mortgages are usually over the longer term which often means more interest is charged overall.

The average amount borrowed to buy a residential property is just over £270,000, according to mortgage broker Tembo, and you usually pay this back over 20 to 40 years, spread across monthly payments.

Although there are some lenders who offer 100% mortgages, there aren’t that many. It’s more likely you’ll need to put down a deposit that’s usually between 5% and 20% of the property’s value and borrow the rest. I’ll explain more about this later. 

How much can I borrow?

You can usually get a mortgage that’s between four and four-and-a-half times your income but in reality they can be anything from three-and-a-half to six times your income. If you’re getting a joint mortgage with another person, this is based on your combined income.

So say you earn £40,000 a year. You could potentially borrow up to £180,000. And if your partner’s salary was £50,000, your total mortgage could be as much as £405,000. However, remember, the more you borrow, the larger your monthly repayments will be.

Plus, there’s a big caveat here. This 4.5 multiple isn’t guaranteed. You might be offered less if the lender thinks you won’t be able to afford the repayments. This could be because a lender will assess your affordability before deciding how much to offer you. This includes looking at things like your credit score, if you have high outgoings or lots of debt. 

Or you could be turned down for a mortgage altogether if you don’t meet the lender’s eligibility requirements. 

To check how much you can borrow, give our really useful affordability calculator a go.

The mortgage deposit and LTV

Most lenders will need you to put down a deposit of 5% to 20% of the total property price, in order to get the mortgage. The money will be your initial equity stake in the property. Over time, you’ll get more equity in the property as you pay off your mortgage debt.

Based on the average UK property price of £271,000, it means you’d need to save between £13,550 and £27,100 – which is the hardest part when it comes to buying a home.

But that’s just the start. The way mortgages usually work is the bigger the deposit, lower the interest rate. This is because if you put more money into the property, it reduces the loan-to-value (LTV) ratio. The LTV is the percentage of the property’s value that is made up of a mortgage. 

So say you’re buying a house for £300,000 and you put down a 10% deposit of £30,000. Your LTV will be 90% because that’s how much you’re borrowing compared to the property price. If you have a £75,000 deposit your LTV is 75%. 

The lower the LTV, the lower risk you appear to the lender as you’re putting in more of your own money and as a result, the repayments will be more affordable. Because you’re borrowing more and are seen as a less of a risk, it’s more likely to offer you better mortgage rates. 

These usually come at 5% increments between 95% and 75%  – so if you can afford to boost your deposit by 5%, then you should get a lower interest rate. It’s a bit of a jump after this to 60% LTV, and once you go beyond this there are no lower thresholds.

Types of mortgage

There are a number of different varieties of mortgage that may affect how much you pay – both monthly and overall – and the interest rate. These include: 

• Repayment – where you pay back the interest and loan at the same time
• Interest-only – as it says, you’ll just be paying off the interest each month
• Fixed rate – a mortgage with a fixed rate of interest for a set period of time
• Variable – a mortgage where the rate of interest can change, usually in line with the Bank of England base rate
• Offset – a mortgage which links your loan to your savings or current account balance to reduce the amount of interest you pay overall

The interest rate will depend on a number of factors including the term (usually two, five or 10 years), the lender you choose and the size of your deposit. If you want more information, we’ve done a whole guide on different types of mortgages where we go into much more detail.

You can also get buy-to-let mortgages, but to keep things simple, we’ll just be talking about residential mortgages in this article.

Mortgage eligibility

As well as looking at whether you can afford the mortgage based on your income, lenders will also have other criteria they consider.

For example, they’ll want to know:

• Employment information. This includes whether you’re self-employed as you might be assessed differently and the lender might have tighter rules as your income isn’t guaranteed in the same way as when you’re an employee. Some lenders may also want to see how long you’ve been at your current job – they may be wary if you’ve just started a new contract as it may not be as stable as a job you’ve been in for years. 
• Your credit history. This is to give them a sense of your financial past and whether you’ve been a responsible borrower or not. If you’ve got a poor credit history you may find it difficult to get a mortgage or be offered higher interest rates.
• Outgoings. This includes regular payments like child care, subscriptions, debts repayments and your general spend. They do this to spot any patterns and work out how much you can afford to repay.
• The size of your deposit. You’ll need to show proof of where the funds have come from. For example, if it’s been gifted from a family member they’ll need to submit their own bank statements to show it’s come from a legitimate source. 
• If you’re a gambler. Mortgage lenders often view gambling with caution as it can suggest you can’t manage your finances responsibly. Lenders will look at how much you spend on gambling on a regular basis, with regular, large, or credit-funded gambling can raise red flags. 

What are typical mortgage rates?

As well as your LTV, the mortgage rate you could be offered will depend on the type of mortgage you choose and the length of the term. Fixed-rate and variable rate mortgages usually have different interest rates attached to them. Lenders may also offer slightly different rates for different mortgage terms, with shorter terms potentially having slightly lower interest rates.  

But here are some examples to give you a flavour of what you can get at the moment. 

According to data firm Moneyfacts, these are the average rates:

• Two year fix: 5.11%
• Five year fix: 5.07%
• 10 year fix: 5.47%
• Two year tracker: 4.9%

But these take into account everything. If you want a flavour of the best deals you could get at the moment, according to Tembo’s panel of over 100 mortgage lenders, you could see rates of:

• Two year fix: 3.95%
• Five year fix: 3.89%
• 10 year fix: 4.39%
• Two year tracker rate: 4.36%

The above rates are all based on a 60% LTV over a 35 year term, as of June 2025. 

How many people can be on a mortgage?

You can get a mortgage on your own, or a ‘joint mortgage’ which can include up to four people with some lenders. Some lenders may even let you have six people on the mortgage. This can be helpful if you want to buy with friends, siblings and increase how much you can borrow, or add someone to your mortgage as a guarantor. 

However, most people get a joint mortgage with two people. It’s worth noting with larger groups applying, the lender may not consider everyone’s income. For example, if four of you are getting a mortgage, you might be able to use all four incomes but some providers might only take into account the highest two incomes when it comes to working out how much you can borrow.

Mortgage fees

When you’re buying a home with a mortgage you may have to pay:

• An arrangement fee or ‘product fee. This is usually upwards of £1,000 and is charged for setting up the mortgage. Sometimes you’ll see a low interest rate in the best buy tables and when you click on the deal there’s a whopping arrangement fee – so be careful. Luckily our mortgage comparison tables include the arrangement fee to give you the true total cost of the mortgage. You can pay this fee upfront, or add it to the mortgage, however, it will attract interest. You could get it added to the mortgage and pay it off straight away by ‘overpaying’ if your lender allows. This prevents interest building on that sum and means you don’t lose the money if something goes wrong. Or if the fee is refundable (to ensure you get the money back if the property purchase doesn’t go through) you could pay it upfront. Not everyone has to pay the arrangement fee and it’s a good idea to compare deals with and without it to see which is the cheapest deal overall.
• Booking fee. These aren’t that common anymore but some lenders charge between £100 and £300 to secure a top deal.
• Valuation fee. This is usually around £300 and needs to be paid upfront. It’s to check the property is worth how much you say it is. In some cases, this fee is covered by the lender and for remortgages and first-time buyers, it can often be free.
• Mortgage broker fee. Some brokers charge customers a fee once they’ve secured you a deal and you’ve completed. It’s usually between £300 and £600 or it could be 1% of the mortgage amount. However, you can easily find a free broker including the multi-award winning Tembo, if you go via Be Clever With Your Cash.

How do I get a mortgage?

The easiest way to ensure you apply for a mortgage you’re eligible for is to use a mortgage broker, as they will search the market for you and find you the best deal. 

Some brokers charge you a fee to do the work but we’ve partnered with Tembo, who will compare your eligibility to thousands of mortgages and give you access to your very own mortgage advisor. And through Be Clever With Your Cash, it won’t cost you a penny!

Alternatively, you can find your own options. A good place to start is by checking our mortgage best buy tables, to give you a sense of what deals are out there, and we’ve also got a really good mortgage calculator that shows you what rate you could get based on your circumstances.

How long does a mortgage application take?

It usually takes between two to six weeks for everything to be approved if you have all the right documents, like proof of earnings, proof of deposit and valid ID. 

What else do I need to consider?

You’ll need to instruct a solicitor or conveyancer to handle the legal side of things – most lenders will insist on it. This includes registering the mortgage to your property as well as managing all the other legal work that comes with buying a property.

The fees will vary depending on the price of the property, the type of property and how complex the process is. However, it’s likely to be upwards of £1,000.

You’ll also need to get buildings insurance sorted before your property completes to reassure the lender your home’s covered for from fire, floods and other damage.

Important

*Your home may be repossessed if you do not keep up repayments on your mortgage. Be Clever With Your Cash may receive a payment from Tembo Money if you complete a mortgage through the link provided. This will not affect the amount you pay for the service.

This broker fee discount of up to £499 is applicable for standard mortgages and remortgages only, more complex cases including guarantor, buy-to-let, adverse credit, and equity transfer may be liable for a fee. The fee you are required to pay will be clearly outlined by your adviser prior to an application being submitted on your behalf. The offer does not cover any other potential fees that may arise during the mortgage process.

Tembo Money Limited (12631312) is a company registered in England and Wales with its registered office at 18 Crucifix Lane, London, SE1 3JW. Tembo is authorised and regulated by the Financial Conduct Authority under the registration number 952652. Tembo Money was awarded Best Mortgage Broker at the British bank awards in 2022, 2023, 2024 and 2025. Rates are not guaranteed and may change by the time you come to apply. Eligibility criteria may vary by lender.

Our calculator is only an estimate of how much you are able to borrow and does not constitute mortgage advice