Mortgage Finder

How mortgages work

When buying a house or flat, most of us won’t have enough money saved to cover the full purchase price. So in order to raise the full amount needed to buy the property, we need to borrow money through a mortgage.

A mortgage is an arrangement where you borrow money from a lender to buy a property, whether as a home or investment (such as a buy-to-let). The term of a mortgage usually lasts between 25 and 35 years.

In exchange for allowing you to borrow this money, your lender will charge you interest. This can be either a fixed rate mortgage at a certain rate, or a variable rate mortgage.

You’ll usually pay your mortgage off in instalments known as repayments. These are normally required to be made every month.

What to consider before applying for a mortgage

• Get to know your credit record. You can get a copy of your credit report for free online. This is one of the main things would-be lenders look at when deciding whether or not to offer you a mortgage (and what rate to offer you). While improving your credit score takes time, there may be some relatively quick wins open to you. By getting familiar with your credit situation, you’ll have a better idea as to whether it’s a factor that’s helping your chances or holding you back.
• Work out what you could afford to pay each month. Taking into account you income and your outgoings, what sort of sum would be affordable for you each month? This is one of the main things that would-be mortgage lenders will be evaluating. If you’ve done your homework and are confident you’d be able to comfortably manage the repayment schedule you’re applying for, there’s a good chance that a lender would come to the same conclusion.
• Where is your deposit coming from? All lenders will want to see where your deposit is coming from and whether it is a gift or part of your savings. For example, if the money is coming from your savings account then you will be required to show bank statements as evidence.
• Have all your income proof ready. Your lender will want to know how much you earn, so it is a good idea to have your income proof readily available for your application. You may be required to present your latest 3 months payslips/bank statements, or your latest P60. The documents you will need to supply depends on the requirements of the specific lender.
• Check your solicitors are on the lender’s panel. Lenders these days are extra careful about which lawyers you are using, in order to target mortgage fraud. Ask your solicitor if they can work with most lenders, and make sure they are a reputable firm.
• Ensure your ID and address documents are up to date. Some mortgage lenders will ask you to provide proof of ID or address to satisfy money laundering requirements and these must be the original document, not a copy, and be current and valid.
• Are you getting a joint mortgage? Think about how strong your relationship is with the other party. Changes to your relationship could make it hard if one party wishes to sell their part of the property.
• What are your plans for the property over the next few years? Match your mortgage to your future plans. For example, avoid taking out a fixed rate mortgage if you plan to sell the property shortly after buying it. Many fixed rate mortgages charge a penalty if you pay them off before the end of the set period which can be expensive.
• Are you eligible for the mortgage? Borrowers generally need to be over 18 years of age. There are other requirements too, but these depend on the lender. Some will want you to have a good credit rating. Others might not allow you to buy inner city apartments. Always read these conditions before applying.

Image of two people at the doorway of a property alongside the stat: A third of Brits list outdoor space as their most important consideration when choosing which property to buy. Image: Finder

In a 2020 survey commissioned by Finder, a third of the 2,000 Brits questioned said that the size of a garden or outdoor space was the most important factor in their decision about which property to buy.

Best mortgage lenders for customer satisfaction in the UK 2022

Finder surveyed customers of the UK’s major mortgage lenders in order to generate customer satisfaction star ratings for those providers. We also asked the same mortgage holders whether they would recommend their mortgage provider to a friend, and we’ve shown both results in the table below.

Overall satisfaction	Would recommend	Issuer	Review
★★★★★	91%		As the UK’s second largest mortgage provider, the building society offers a wide number of products, mainly with fixed rates. Founded in 1846 as a mutual financial institution, Nationwide is run for the benefit of its members, and consistently ranks highly for customer service.	Compare with broker
★★★★★	91%		Barclays mainly offers fixed rate mortgages, along with some tracker products. This bank often has leading rates, and around 9 out of 10 of the customers we surveyed would also recommend the lender to a friend.	Compare with broker
★★★★★	89%		Santander is another provider offering mostly fixed rate mortgages, and it regularly ranks highly in best-rates tables. The bank’s customer service performance also generally polls well, reflected in the 89% “would recommend” score in our survey.	Compare with broker
★★★★★	88%		NatWest has a range of fixed rate mortgages available, including 95% loan to value (LTV) products. Its easy to deal with approach and helpful customer support were praised by some of the customers in our survey.	Compare with broker
★★★★★	92%		Now part of Lloyds Banking Group, Halifax offers one of the largest number of mortgages from a single lender, particularly in the fixed-rate space. Not always the top ranked for competitive rates, the bank does poll well for customer service.	Compare with broker
★★★★★	90%		The Royal Bank of Scotland (RBS) is part of the same banking group as NatWest. It has a decent number of mortgage products available, which are fixed terms products, although it doesn’t often have the most competitive rates.	Compare with broker
★★★★★	87%		L&C is the country’s largest fee-free mortgage broker. With access to over 90 lenders, it’s able to advise on a vast choice of mortgages depending on a borrower’s personal circumstances.	Visit broker
★★★★★	85%		Virgin Money first began operating as a bank in 2010, developing its mortgage and saving products before its current account. In 2019 the lender was the first in the UK to launch a 15-year fixed term mortgage. Formerly a mostly-online service, a merger with Clydesdale and Yorkshire banks means Virgin Money now has some UK high street presence.	Compare with broker
★★★★★	81%		The UK’s biggest bank is not the UK’s biggest mortgage lender. But HSBC does offer fixed term mortgages at rates that are consistently among the most competitive. Its customers in our survey also highlighted HSBC’s good customer service and easy to follow processes.	Compare with broker
★★★★★	85%		Lloyds offers an extensive number of mortgages, which are predominantly fixed term deals lasting 2, 5 or 10 years. It currently lends on LTV ratios of up to 95%, and is recommended by 85% of its customers in our survey.	Compare with broker
★★★★★	80%		Mojo is an online mortgage broker, which works with more than 90 lenders. It gives its users access to a range of different mortgage products in the market, with an application process that takes place online.	Visit broker
★★★★★	67%		Relative newcomer Habito launched in 2015. It’s a digital-only, whole of the market mortgage broker, giving its customers access to mortgages from all different UK lenders. Unusually, Habito is also a lender itself, and launched the UK’s first 40-year fixed term mortgage in 2021.	Compare with broker

Customer satisfaction ratings methodology

We asked mortgage holders to rate their satisfaction with the service they had received from their lender, and also whether they would recommend their mortgage provider to a friend. Our independent survey of 1,305 mortgage customers was carried out in December 2021 – read full details of our methodology here.

We have shown all the customer satisfaction star ratings and recommendation scores for the brands listed in the table above. We also used these results to decide the winners of the Finder Mortgages Customer Satisfaction Awards 2022.

How to compare mortgages

The introductory rate is one of the most important factors to consider when comparing mortgages, but it doesn’t tell the whole story. Here are some other elements to take into account.

1. Term length.Fixed-rate mortgages with longer terms have higher rates, but you’ll be protected against potential rate rises for longer. It’s often recommended to apply for short-term mortgages and remortgage once the introductory term ends, but there’s no guarantee you’ll be in a financial position to be approved for a remortgage at that time, which is another reason why some people prefer the security of long-term mortgages.
2. Fees. Most mortgage products will have one-off fees attached to them. These should be considered as well as the interest rate. The best way to compare mortgages is to calculate the total amount you’ll spend during the introductory term. The main fees to look out for are an “arrangement” or “product” fee, and a “valuation” fee. These often adds up to several hundred pounds, even though some mortgage products don’t include them at all. Some lenders will give you the option to add any fees onto the mortgage, but this should be avoided whenever possible, as it will mean paying interest on them for the entirety of your mortgage term.
3. SVR (standard variable rate). This is the rate you’ll be switched onto after the introductory rate ends. It’s best to remortgage before you’re moved on to this significantly higher rate, but that’s not always possible, so it’s worth bearing this rate in mind.
4. Total repayable. This is the total amount you’ll owe over the length of your mortgage. This won’t be too important if you’re planning to remortgage after the introductory term ends, but it’s still a useful figure to help you compare products. The easiest way to reduce your total repayable is to cut the length of your mortgage. Your monthly repayments will be higher, but the amount of interest paid will drop significantly.
5. LTV (loan-to-value). This is the amount of money you’re borrowing from your lender, expressed as a percentage of your property value. With a higher deposit, you’ll be able to access mortgages with a lower LTV ratio. These mortgages have lower rates, plus you’ll pay less interest in total.

To illustrate this point, our box below shows two scenarios for a property costing £250,000. In the case where the property is purchased using a 20% deposit, the LTV on the mortgage would be 80%. The buyer secures a better interest rate (2.20% in this theoretical example), resulting in a monthly repayment of £867. They are paying £366 less per month than in the second scenario, where the property is bought with a 5% deposit, meaning a LTV ratio of 95%.

Best mortgage intro rates from high-street banks

Largest lenders by market share

Best mortgage lenders in the UK by customer satisfaction: A summary

Frequently asked questions

• How much can I borrow?

  The amount of money you can borrow for a mortgage depends on your choice of mortgage provider and your personal circumstances. If you have a large deposit and are deemed a responsible borrower, you’ll often be approved to borrow more. However, most mortgage lenders will allow you to borrow no more than 4 to 5 times your annual income.

• How do you get a mortgage?

  You can apply for a mortgage by contacting a mortgage lender. This can be done directly, perhaps by visiting a local branch, calling or finding a lender online. Alternatively, you can use a mortgage broker to apply on your behalf.

• What are mortgage interest rates?

  Your interest rate determines the monthly interest you’ll pay on your mortgage balance. Typically, your mortgage will include an introductory rate for the first few years, which converts to a higher standard-variable rate thereafter.

• What is a mortgage in principle?

  A mortgage in principle is a guarantee issued by a mortgage lender, stating that it will lend a specific amount of money once you find a property. However, this agreement typically only lasts 90 days and your property will have to pass your lender’s checks.

• What happens to your mortgage when you move house?

  If you’re planning to move house, you’ll need to notify your mortgage provider. It may be able to port your mortgage onto the new property. If not, you’ll need to remortgage before you move.

From February 2020 to May 2020, mortgage approval rates fell by 87%.

For more property-related statistics, download the PDF below.

Download the 2021 Property statistics PDF

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