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Guides - What is a Residential Mortgage?


If you’re planning on purchasing a property to live in and require the funds to do so you’ll need a residential (regulated) mortgage.


Purchasing your own property is a great way to save money each month as mortgage costs tend to be cheaper than renting for a similar size property and also a great investment for the future if property prices rise.


A mortgage for buying a home to live in is far more flexible now than it has been in the past with options such as only putting down a 5% deposit and being able to chose from lenders with different incentives such as those with no upfront fees and some even offering cash back incentives.


Residential rates vary, from prime rates for those with no adverse credit and larger deposits of 30% +, to higher rates for those with past credit blips or non UK nationality.


There are also different types of mortgages you have access to e.g. Fixed rates, where the interest rate is fixed for a certain period of time, most commonly fixed for 2-5 years however there are now mortgages available to have the rate fixed for up to 40 years. Variable or tracker mortgages, which fluctuate can sometimes be cheaper, if interest rates are dropping. If you expect interest rates to rise, locking in a fixed rate could be a safe option to prevent your rate getting out of control and ensuring you can still keep up with your mortgage repayments.


Banks, building societies and specialist lenders have their own criteria and their ways of assessing how much you can borrow and at what rate will vary, however they will look into the following:


  • Age now and your age at the end of the term

  • Your gross yearly income (some lenders will even take into account your bonuses and overtime so you can borrow more)

  • Credit card balances

  • Monthly loan repayments

  • Average monthly spending

  • Your credit history

  • If you are a first time buyer

  • Your nationality and how long you have lived in the UK


Interest Rates vary widely, but at present they start from 0.99% per year for an average buyer putting down a 25% deposit.


Most residential borrowers prefer to take out repayment mortgages because it means at the end of the term the mortgage will be paid off in full so there is no need for alternative funding.


Interest only mortgages are also available however as you only pay interest, you’ll need to repay the full value of your mortgage at the end of the term.


Most borrowers will remortgage their properties at the end of their fixed period, due to the lender's standard rate being less competitive. With over 199 lenders - with Finanze, it’s personal. Providing bespoke solutions for bridging, buy to let, development finance, residential and commercial mortgages for private and corporate clients.

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