How To Get A Mortgage In The UK

A mortgage is essential for most people who want to buy a home in the UK. As of June 2023, the average UK home cost £288,000. So unless you have the funds to pay for a property in cash, a mortgage is necessary to help you pay for your home in instalments.

In this article, you’ll learn all about how to get a mortgage in the UK.

What are the requirements to get a mortgage in the UK?

First things first: what do you actually need to get a mortgage in the UK? The list is fairly extensive:

• Pass a credit check — Credit checks tell mortgage lenders how reliable you are when it comes to paying off your debts. In the UK, this is usually a non-negotiable step to getting a mortgage.
• A deposit — Most mortgage lenders require a minimum 10% deposit. They then loan you the remaining 90% (or the remaining loan-to-value). Some mortgage lenders will accept a 5% deposit.
• Passport or driving licence — This is used to prove your identity.
• Current account bank statements — These are used to confirm your regular income and outgoings so the lender can check what you can afford to pay towards your mortgage.
• Payslips (if you’re employed) — Three months’ worth of payslips are usually required to show your regular income.
• P60 form (if you’re employed) — You get a P60 form every year from your employer. Your P60 shows how much tax you’ve paid in the last year.
• Utility bills — These are used as proof of your current address (other proof may be needed if you’re moving from abroad).
• Proof of benefits — Buyers receiving benefits in the UK must give evidence of how much they’ve received.

If you’re self-employed, you might need to provide additional documents to prove your income.

The above applies if you’re a UK citizen or have indefinite leave to remain in the UK. If you’re in the UK on a visa, you can still apply for a mortgage, but there may be more criteria you need to meet before you’re accepted. This might include:

• At least 12 months remaining on your visa.
• Confirmation from your employer that they’re renewing your contract.
• A good UK credit score.
• Higher income (often at least £75,000).
• A higher deposit (lenders may offer a lower loan-to-value based on the time left on your visa).

How hard is it to get a mortgage in the UK?

Lots of reputable banks and building societies offer mortgages in the UK, so many people can get an agreement in principle without much difficulty. However, getting a mortgage with your preferred terms isn’t quite as easy.

Things to consider when choosing your mortgage include:

• Interest rates, and whether it’s fixed or variable.
• The length of your mortgage term (longer terms usually mean lower monthly payments but higher interest rates).
• The amount you’ll need to pay each month and whether this is affordable for you.

How much do you need to start a mortgage in the UK?

Most mortgage lenders ask for a deposit of at least 10%. So if your house costs £200,000, you’ll need a £20,000 cash deposit. You borrow the remaining £180,000 from the lender and pay this back over the mortgage term.

Some lenders will give you a mortgage with just a 5% deposit. In the example above, a deposit with a 5% mortgage would be £10,000.

Generally, the lower your deposit, the higher your interest rate. So it can be more cost-effective to save a larger deposit if possible — you’ll have to weigh up any savings against your current outgoings, such as rent and bills.

Can I get a 100% mortgage?

100% mortgages do exist in the UK, but they’re tricky to get. They’re usually guarantor mortgages, which means you don’t need a deposit, but a family member or friend must agree to cover your mortgage repayments if you don’t pay them.

Your guarantor usually has to put up their own property or savings as a guarantee, so this is a risky prospect for most people.

What might stop me from getting a mortgage?

You may be rejected by a mortgage lender if:

• You don’t pass their credit check criteria (for example, you have a lot of outstanding debt).
• You can’t provide the evidence your lender requires (such as proof of ID or income).
• Your lender can’t cater for your requirements (for example, you want a 5% mortgage and your lender doesn’t offer these).
• You don’t meet their lending requirements (for example, you only have three months left on your visa, or you’re on a type of UK visa and have an income of less than £50,000).
  

Ultimately a mortgage lender can choose to accept or reject your application on their terms. So you have the best chance of being accepted if you check their requirements before you apply.

Step-by-step guide to mortgage applications

Here’s a step-by-step rundown to applying for a mortgage in the UK.

1. Check your credit report

Check your credit report before you do anything else. This will help you see if you have any outstanding debts you should pay off before you start saving. If you haven’t been living in the UK for long, you can also see if you have an established credit report (you’ll need a UK credit score to apply for a UK mortgage).

Equifax, Experian, and TransUnion are credit reference agencies. They allow you to see and monitor your credit score, so you can work on fixing your credit score before you apply for a mortgage.

2. Save a deposit

The next step is to start saving for a deposit. House prices are notoriously high in the UK, especially in London and the surrounding counties, as well as other affluent areas. So it’s important to start saving early.

Lifetime ISAs are a good way to save for a mortgage if you’re a first-time buyer. You could also start a money club to build funds alongside your friends and family.

3. Speak to mortgage lenders

When you’ve saved up a good deposit, it’s time to book an appointment with your chosen lender.

Do lots of research to find the best lender beforehand. Consider their interest rates, mortgage terms, and loan-to-value ratios, as well as their reputation for customer service.

If possible, consider using a mortgage broker or UK financial advisor to help you. While they’ll charge for their services, you might save in the long run if they find you a good deal.

In the UK, almost all mortgage lenders charge interest when you borrow money for a house. This may conflict with your faith or values, so it’s not suitable for everyone. Many Muslim home buyers seek Sharia-compliant mortgages that operate in a different way, so you’re not charged interest.

4. Get a mortgage agreement in principle

Once you’ve agreed terms with a lender, they’ll offer you a mortgage agreement in principle. This outlines your mortgage offer so you know how much you can borrow.

Mortgage agreements in principle usually have an expiry date. After this time, you’ll need to reapply.

5. Find a property and put in an offer

Now you know how much you can borrow, you can start looking for your new home. Sites like Zoopla and Rightmove are a good place to start, as many local estate agents will list available properties on these sites.

Book a viewing to see the property up close. If you like it, it’s time to put in an offer. If the seller accepts, congratulations! You’re on your way to becoming a UK homeowner.

6. Exchange contracts

You won’t need to make your first mortgage repayment until you’ve exchanged contracts and completed the house sale. Your lender will let you know when the first payment is due, and how to make the payment.

Plan for a home deposit with Bloom

Thinking about saving to buy a home? Join a rotating savings club with your friends and family to get the ball rolling.

Bloom’s app helps you manage your savings club from your phone. It’s safe, easy to use, and helps your entire community plan together. Find out more about setting up your Bloom circle with Bloom.