In the UK, a mortgage is a loan provided by a bank or building society to help you buy a home. Here's how it helps you purchase your first home:
- Deposit: When buying a property, you're typically required to provide a deposit, which is usually a percentage of the property's value (e.g., 5%, 10%, or 20%). A mortgage covers the rest of the cost of the home.
- Lending Amount: The mortgage lender will assess your financial situation, including your income, credit history, and outgoings, to determine how much they are willing to lend you. Generally, lenders will offer a loan of up to 4.5 times your annual income (although this can vary).
- Repayment: You agree to pay back the mortgage over a set period (typically 25 years), making monthly payments to the lender. These payments cover both the principal (the money borrowed) and the interest (the fee for borrowing the money).
- Types of Mortgages: There are various mortgage types, including:
- First-time Buyer Schemes: As a first-time buyer in the UK, you may also benefit from government schemes that can help make buying a home more affordable. These include:
In summary, a mortgage makes buying your first home possible by providing the majority of the purchase price, which you then repay over time, along with any interest. The deposit, loan approval process, and type of mortgage you choose will depend on your financial situation.