Compare rates and lenders with Koodoo to find the right mortgage deal for you[1]


What types of mortgage are there?

The right mortgage isn’t quite as simple as choosing the deal with the best interest rate. The type of mortgage that is right for you depends on your financial situation, your future plans and the type of property you’re looking to buy.

Fixed rate mortgages

With a fixed rate mortgage, your repayments are guaranteed to stay the same for a set term, usually two or five years.

The advantage of a fixed interest rate is this security – knowing that your mortgage payments will stay the same for a certain length of time, which can make it easier to manage your budgets.

That certainty can come at a cost, as fixed rate mortgages tend to have higher interest rates than variable rate mortgages. This isn't always the case though.

The other main disadvantage of fixed rate mortgages is that you won’t benefit from a reduction in costs if interest rates fall.

Variable rate mortgages

If you’re on a variable rate mortgage, the interest rate charged on your mortgage can change, meaning so too can your monthly repayments. That can make it difficult to budget for your mortgage repayments.

Variable rate mortgages will generally change when the Bank of England changes its base rate.

Usually, interest rates and fees for variable mortgage deals are lower, at least initially, than fixed rates though if rates increase a variable mortgage may end up costing you more.

There are a few different types of variable rate mortgages:

  • Standard variable rate (SVR) mortgage – your lender’s standard interest rate for mortgages. You’ll be moved onto this at the end of a time-limited mortgage rate if you don’t switch and it’s likely to be much higher than the rate offered on a new deal.
  • Discount mortgages – your interest rate tracks your lender's standard variable rate minus a set percentage. If your lender’s SVR goes up by 1%, the rate you pay will go up by 1% as well.
  • Tracker mortgage – your interest rate tracks the Bank of England base rate plus a set percentage. So if the base rate is reduced by 1%, your mortgage interest rate will also reduce by 1%.

Offset mortgages

An offset mortgage links your savings to your mortgage and 'offsets' the value of those savings against the mortgage balance.

In practice, this means you'll pay less interest on your mortgage. For example, if you had a mortgage of £100,000 and savings of £20,000, you’d only pay interest on £80,000 of your mortgage.

But it also means your actual savings won't earn any interest and you might not have unrestricted access to your money.

An offset mortgage can make sense when mortgage rates are high or savings rates are very low.

How much can I borrow for a mortgage?

Your mortgage lender will look at your finances to work out what it believes you can afford to borrow. It’ll base this decision on:

  • Your salary. Or a combination of your salaries if you’re applying for a joint mortgage
  • Any additional income you have, like bonuses or tax credits
  • The size of your deposit. You’ll usually need at least 5%-10% of the total loan value
  • Any financial outgoings you have – bills, credit cards or insurance payments
  • Your credit history. A good credit history of meeting repayments will give you access to better deals

To get an estimate of how much you could borrow and your repayments, try our mortgage calculator.

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How much deposit do you need for a mortgage?

If you’re looking to buy a home, most lenders will expect you to have a deposit of at least 5%-10% of the property’s value.

A larger deposit will let you access better mortgage deals.

If you’re struggling to build a deposit, government schemes like Right to Buy can help you to buy a home with a smaller deposit.

There are also specific financial products designed to support buyers in building a deposit, like the Lifetime ISA. With a Lifetime ISA you can save up to £4,000 per year, which is then topped up by 25% by the government, on top of any interest you earn.

Find out more about Right to Buy >

How does a mortgage work?

There are two different ways to pay for your mortgage – repayment or interest-only.

Repayment mortgages

With a repayment mortgage, you’ll pay back what you’ve borrowed, plus any interest, over the term of your mortgage.

Each month, the size of your outstanding mortgage will get a bit smaller, until you’ve repaid the whole loan. At the end of the mortgage term, you’ll own your home outright.

Your monthly repayments will be higher with a repayment mortgage, since each month you are paying off both the capital you’ve borrowed and the interest charged on your loan.

Interest-only mortgages

On an interest-only mortgage, you only pay the interest that builds up on your mortgage each month. You pay nothing towards the capital (the amount you borrowed). This will make your monthly repayments lower.

At the end of your mortgage term, you’ll need to repay the capital. You’ll need a plan for how you’ll do this – separate investments, or simply selling the property.

Interest-only loans are more common for buy-to-let mortgages.

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What kind of mortgage do I need?

First-time buyers

Some lenders offer mortgages specifically designed to support first-time buyers.

These mortgages are for those borrowers who have never owned or inherited residential property before.

You won’t qualify as a first-time buyer if you’ve ever owned a commercial property with living accommodation, or if you’re looking to buy a property with someone else who’s previously owned a home of their own.

Because these mortgages are aimed at first-time buyers, they are usually available for those with only a small deposit of around 5%.

Residential mortgage

Most mortgages offered by lenders are simply residential mortgages ‒ deals open to people looking to buy a property which they plan to live in.

You won’t be able to use these mortgages to purchase a property that you plan to let out.


Once you get to the end of your initial mortgage deal it’s generally a good idea to remortgage. This is where you move the loan to a new fixed or variable rate, rather than sitting on your lender’s SVR.

You can remortgage even if you are in the middle of a fixed period, though this will mean you incur early repayment charges (EPC).

Remortgaging can be a useful option too if you’re looking to borrow more money or increase your mortgage term.


If your mortgage is for a property that you plan to rent out to tenants, you’ll need a buy-to-let mortgage.

Interest rates and fees are usually higher than residential mortgages, and you may need previous experience of being a landlord to be eligible.

What information do I need to apply for a mortgage?

Get your details together before you start, so we can compare the options available to you. We’ll ask for things like:

  1. Your current situation

    Whether you’re a first-time buyer, moving to a new property or remortgaging your existing one

  2. Your details

    Your name, address, and whether you’re making a single or joint application

  3. Details of the property you’re buying

    Whether it’s a new build, a house or a flat

  4. How much you want to borrow

    Usually the value of the property you’re buying, minus your deposit. If you're not sure, you can give an estimate based on your budget

  5. How much you earn

    Your salary before tax, plus any extras like bonuses or overtime

Tips to help you find a better mortgage rate

Comparing mortgage deals isn’t the only way to find great rates. Here are five more tips to help you get the deal you want:

  1. Improve your credit score

    Lenders will check your credit history against their criteria when deciding how much to lend

  2. Get on the electoral register

    A really simple but effective step towards improving your credit score

  3. Build your deposit

    A bigger deposit means you won’t need to borrow as much and you’re likely to be offered better rates

  4. Pay your bills

    Paying your bills regularly and on time will be reflected in your credit score and shows lenders you’re reliable

  5. Check your eligibility

    Use an eligibility checker to find out which mortgages you qualify for without affecting your credit score

  6. Start planning early

    It can take a while to build or repair your credit score. Mortgage lenders can check the last six years of your credit history, so it’s worth preparing early

Frequently asked questions about mortgages

Agreement in principle (AIP) means that the lender is willing to lend you a specified amount, in theory, based on some basic checks on your income, spending and debts. It’s sometimes also called a mortgage in principle.

Getting an AIP can help when buying a property as it demonstrates that you can get the funding needed for the purchase. You don’t have to use the same lender when applying for an actual mortgage either.

However, this AIP would have been agreed on the specific requirements for that specific lender. This may then make it difficult to get the same mortgage in principle from another lender.

No, only a soft credit check is used for a mortgage in principle, so it shouldn’t leave a mark on your credit score. When you make a full mortgage application a hard check takes place.

Most mortgage terms are between 15 and 35 years, but you can get terms for longer or shorter periods.

The advantage of a longer term is that your monthly mortgage repayments will be lower, potentially making them more affordable. However as you will be charged interest on your debt over a longer period, it will cost you more overall.

Loan to value, or LTV, is a term used by lenders to explain how much deposit you need in order to qualify for a particular mortgage deal.

So if a mortgage is available at 80% LTV that means you will need at least a 20% deposit in order to apply. The lower the LTV, the lower the interest rate tends to be.

Most lenders allow you to overpay your mortgage by up to 10% of the outstanding balance each year, without charging you an early repayment charge. Overpaying means you pay the mortgage off more quickly, saving you money in the long run on interest charges. However, it’s important to only overpay if you can afford it.

Also, each lender will have different terms regarding overpayments, so it's always best to check your mortgage terms beforehand.

Yes, as long as a provider thinks you can afford it you might be able to get a mortgage if you’re on income-related benefits like Employment and Support Allowance, Income Support or Universal Credit.

Yes, you can. There are no legal reasons why you can’t make an offer on more than one house, but you might end up having both offers accepted which could leave you in the difficult position of having to withdraw one of your offers.

Most people can. If you have a stable income, enough savings for a deposit and a good credit score then you’ll have more choice. But there are mortgages for those with bad credit scores and government schemes are available to help you get on the property ladder.

There are three main credit reference agencies and they all have different scoring systems. Experian considers a score above 881 to be good, while Equifax say it’s anything over 420. TransUnion rate scores over 604 as good.

But in reality, these ‘scores’ are just a guideline. Each lender will have its own criteria that it scores you against, so just because you don’t fit the profile of one lender, it doesn’t mean you won’t be able to get a mortgage anywhere.

A broker is a mortgage expert with knowledge of all products and lenders on the market. They work on your behalf to search the mortgage market to find a mortgage you can afford and apply for successfully.

Once they've reviewed your income and expenditure, the size of your deposit and the amount you want to borrow, the broker will advise you which mortgage products are are right for your circumstances.

They'll make you aware of the interest rate, benefits (like cashback) and fees that apply to your mortgage.

Brokers usually have access to the whole market unless the lender chooses not to give them access to their products. Even then, the broker can see the details of the mortgage, but won't be able to complete the transaction for you.

To get access to these mortgages, you'll have to approach the lender directly. But there’s a risk that you’ll apply for an unsuitable or unaffordable mortgage, or that the lender rejects you, which could adversely affect your credit record.

Brokers either charge a flat fee, of around 1% of the mortgage value, or a commission based on the size of your loan. The broker must tell you what you're going to pay before you agree to the mortgage.

The cost's illustrated in the 'key facts' document outlining your mortgage repayments, fees and charges.

  • Arrangement/booking fee – what it costs to set up your mortgage
  • Valuation fee – to check the property’s adequate security for the lender
  • Survey fee – you want a more in-depth check of the property for your own peace of mind
  • Broker fee – what you usually pay for mortgage advice – but our advice is free
  • Stamp duty – a tax homebuyers pay, which goes up with value
  • Conveyancing fee – the legal cost associated with buying your house
  • Land Registry fee – what you pay the Land Registry to update the property records

Looking for something more specific?

Bad credit mortgages

If you have problems with your credit history, it can be harder to find a mortgage. But there are some lenders that will consider your application.

You might be asked to provide more evidence that you can afford repayments and you’ll be asked about your previous credit problems.

Cashback mortgages

You’ll get a lump sum after completion, which can be great to pay off fees or buy essentials for your new home.

They don’t necessarily offer the best rate, and may come with larger fees, so compare and get advice on the overall cost.

Low-deposit mortgages

Mortgages that let you put down a smaller deposit, such as 5%.

For really small or no-deposit mortgages, you might be limited to products like joint borrower sole proprietor, where a family member essentially borrows alongside you and commits to making repayments if you can’t.

Self-employed mortgages

If you're self-employed, you'll generally need to provide two to three years’ worth of accounts to prove you can afford a mortgage, though some specialist lenders will accept less.

Other than that, they’re the same as for employed applicants.

Mortgages for unusual homes

Lenders are less likely to lend on homes of non-traditional or unusual construction.

You might have to put down a larger deposit and you’ll probably have fewer deals to choose from.

News and articles on mortgages

Page last reviewed: 14 September 2023

Page reviewed by: John Fitzsimons



[1]For online mortgage comparison and advice introduces customers to Koodoo which is the trading name of Mortgage Power Limited who are authorised and regulated by the Financial Conduct Authority (FRN 845978).’s relationship with Koodoo is limited to that of a business partnership, no common ownership or control exists between us. Please note, we cannot be held responsible for the content of external websites and by using the links stated to access these separate websites you will be subject to the terms of use applying to those sites.