Residential purchase mortgages

Since 2015, the average price of a home in the UK has risen over £250,000, while it nearly doubles this amount in London and the South East. This means that very few people can afford homes from their savings. This is why residential mortgages are common in the United Kingdom.

A residential mortgage is simply a large loan meant to help you, the borrower, to purchase a home. The property you intend to buy is put up as the security for this mortgage. A residential mortgage ensures that the buyer can raise the value of the property from an up-front deposit and a top-up from the lender. The borrower is expected to pay back the money loaned plus an interest rate monthly for a designated period.

You can only take up a residential mortgage on a house you intend to use as your residence. If you plan on using the property as a commercial property, you cannot finance the plan with a residential mortgage. Find out more on some of our other buy to let and commercial mortgage services we offer.

Repayment of a residential mortgage

There are two types of repayments for residential mortgages. These are repayment and interest-only mortgages.

For a repayment plan, the borrower is expected to pay portions of the value of the property and interest on a monthly basis.

An interest-only plan requires the borrower to pay the interest on the borrowed amount. Once the loan term ends, the borrower will need to pay back the initial amount borrowed. However, you can pay the loaned amount within the loan period if you can afford it.

Types of interests paid on residential mortgages

Variable rate

This is a rate repayment plan where the borrower pays an SVR interest (Standard Variable Rate) to the lender. This rate changes from month to month at the lender’s discretion. This rate is determined by the changes in the general economy and the lending market.

Fixed rate

This is a plan where the interest rate paid is fixed for a set period, usually a few years. This gives you the time to plan your budget to suit your repayment requirements. This is an ideal interest plan since your month to month repayment amount is consistent throughout the repayment period.

Tracker mortgage rate

This is the rate you pay when you take out a tracker mortgage. It varies from month to month while tracking financial changes to the Bank of England base rate.

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