The Mojo guide to mortgages
A mortgage is probably the biggest financial commitment you’ll ever make, so it’s worth spending some time to make sure you know what you’re getting yourself into.
In this guide (and the linked pages) you’ll get an overview of everything to do with mortgages – starting at the very beginning.
What is a mortgage?
A mortgage is a loan you take out to buy a property or land. The loan is secured against the value of the property/land, which means it can be taken away if you can’t or don’t keep up your repayments.
Who can get a mortgage?
If you earn enough money, have a big enough deposit and your credit score is decent, you’re likely to be eligible for a mortgage.
You can’t get one until you’re 18 and you may not get one if you’re too close to retirement to pay it off in time.
If you’re self-employed you can still get a mortgage as long as you can properly prove your income.
Every mortgage lender has different rules about who they’ll lend to. There are also specialist mortgages for people with poor credit scores or histories of financial trouble.
Our Mortgage Matcher can tell you if you’re eligible.
How much do I need to earn to get a mortgage?
What you can afford to repay each month matters more than how much you earn.
Monthly mortgage repayments depend on how much money you borrow and for how long. The amount you have to borrow depends on the price of the property you’re buying and the size of your deposit.
Lenders decide what you can afford to borrow based on your monthly income and outgoings.
What mortgage can I afford?
Our mortgage calculator will tell you in less than 1 minute what you can afford to borrow.
What is a mortgage deposit?
Mortgage lenders ask you to put down a lump sum of cash before they’ll lend you money for a house. This deposit typically has to be worth at least 5% of the property’s value.
e.g. For a £250,000 house, you’d need a deposit of at least £12,500 (5%).
The percentage of the property’s value you borrow after chipping in your deposit is called your Loan to Value (LTV) ratio. A 5% deposit gives you an LTV of 95%, a 10% deposit gives you an LTV of 90%, and so on.
Generally speaking, the lower your LTV is, the better rate the lender will offer -meaning a lower monthly repayment.
How much are mortgage repayments?
It depends on many different factors, including: the size of the mortgage, the term (length) of the mortgage, the mortgage’s rate and the type of mortgage you choose.
Our Mortgage Matcher can find a deal to suit you and show you how much you’d pay each month.
What is a mortgage term?
The term of a mortgage is how long you’ll be paying it off. It’s typically 25 years, but it can be as much as 40 years or as little as you like, as long as you can afford to pay it during that time.
The term of your mortgage can have an effect on how much you have to pay each month, so it’s something worth considering carefully.
What is a mortgage rate?
A mortgage rate is the amount of interest you’re charged on money you borrow to buy a property.
What types of mortgage are there?
There are lots of different kinds of mortgages designed to suit all kinds of people.
First time buyer mortgages are designed to help people get onto the property ladder for the first time, especially if they have a relatively small deposit.
Remortgages help home owners to save money on their monthly repayments or borrow additional cash for big ticket purchases like home improvements.
Buy to let mortgages are designed for people who have a property or want to buy a property they intend to rent out to tenants.
Which mortgage is right for me?
It absolutely depends on your circumstances and what you need. At Mojo we can help you understand which is best for you.
How do I get a mortgage?
The first thing to do is to check if you’re eligible for a mortgage. Mojo’s Mortgage Matcher can give you an answer in 1 minute.
Once you find a property you want to buy, you need to choose a mortgage. You could go straight to a lender such as a bank or building society but they’re only going to sell you their own mortgage products. That’s fine but it means you could be missing out on better deals elsewhere.
If you go to a mortgage broker instead, they’ll look at deals from several – if not all – lenders. The more lenders and products a broker has access to, the more sure you can be you’re not missing out on something better. At Mojo we compare deals from more than 90 lenders and 20,000 mortgages.
Be aware that some mortgage brokers charge a fee of around £500* for this service. Others, like Mojo, don’t charge a fee.
With Mojo you can do your fact-find from your laptop or phone, whenever it’s convenient for you. You don’t have to finish it in one sitting because you can save your progress and return at any point. You can even take photographs of the supporting documents we need with your phone’s camera and upload them directly to us.
The process takes around 20 minutes and gives you a mortgage in principle, which says how much you can borrow for a mortgage, in principle. At the end it will provide you with relevant matches based on your circumstances.
After that, our mortgage advisers will review your matches with you and, if you’re ready to apply, submit your application to the lender.
The lender will then carry out a series of checks, assessing what you can afford, how you’ve handled borrowing in the past (you’ll be credit checked) and potentially checking the property is worth what you’ve asked to borrow so that they can make a decision on your application.
If your application is approved, the lender will make you a mortgage offer - which is valid for three to six months, depending on the lender. Once you’ve accepted the mortgage offer you can get your solicitors to do their thing so that you can move towards exchanging contracts with the seller of the property, and completion – which is when your mortgage completes and you get the keys to the new place.
We handle all the paperwork and phone calls while keeping you in the loop, so you’ll never have to chase anyone for updates on your mortgage’s progress.
*Money Advice Service figure