Complete Guide
UK Mortgages Explained
Every mortgage type available in the UK explained in plain English. Deposit requirements, typical rates, eligibility criteria, and what to expect from the application process.
Residential Mortgages
Standard mortgages for properties you will live in as your main home.
Residential mortgages are assessed on your personal income and affordability. Most lenders will lend 4-4.5x your annual income. Available as fixed rate (2, 3, 5, or 10 years), variable rate, tracker, or discount products. First-time buyers may access 95% LTV products through various government-backed schemes.
First-Time Buyer Mortgages
Specialist products with lower deposits and government scheme support.
Designed for buyers who have never owned property. Many lenders offer specific FTB products with lower fees or cashback. Government schemes include Help to Buy equity loan (closed to new applicants), Shared Ownership, Lifetime ISA bonus, and the First Homes scheme offering 30-50% discounts on new builds.
Buy-to-Let Mortgages
For properties purchased as investments to rent to tenants.
BTL mortgages are assessed primarily on rental income. Most lenders require rental income to cover 125-145% of the mortgage payment at a stress rate of 5.5%. Available on interest-only or repayment basis. Portfolio landlords (4+ mortgaged properties) face additional scrutiny under PRA rules introduced in 2017.
HMO Mortgages
Specialist products for Houses in Multiple Occupation.
Not all lenders offer HMO mortgages. Those that do may restrict the number of rooms (typically 6-8 max), require licensing evidence, and may apply different stress tests. Some lenders assess on aggregate room rents while others cap at a single-let equivalent. Rates are typically higher than standard BTL.
Limited Company Mortgages
BTL mortgages for properties held in a Special Purpose Vehicle (SPV).
Increasingly popular since Section 24 removed mortgage interest relief for individual landlords. SPV structures allow full mortgage interest deduction against rental income and corporation tax (currently 25%) instead of personal income tax. Most lenders require a personal guarantee from directors.
Commercial Mortgages
Finance for offices, retail, industrial, and mixed-use properties.
Commercial mortgages have shorter terms (typically 15-25 years), higher deposits, and more complex underwriting. Lenders assess the commercial viability of the property and the tenant covenant strength. Terms may include personal guarantees, debt service coverage ratios, and annual reviews.
Bridging Finance
Short-term loans for purchases, refurbishments, and auction buys.
Bridging loans are short-term (typically 3-18 months) and designed for speed. Used for auction purchases (28-day completion), refurbishment projects, chain-break situations, and property development. Interest is charged monthly (not annually) and can be rolled up into the loan. A clear exit strategy (sale or refinance) is required.
Development Finance
Funding for ground-up builds, conversions, and major developments.
Development finance covers land purchase and build costs, released in stages as construction progresses. Lenders typically fund up to 65% of Gross Development Value (GDV) and 100% of build costs. Requires detailed planning permission, build schedules, cost breakdowns, and professional quantity surveyor monitoring.
Self-Employed Mortgages
Mortgages for sole traders, freelancers, and company directors.
Self-employed applicants typically need 2-3 years of accounts or SA302 tax returns. Lenders assess income differently — some use net profit, others use salary plus dividends for directors. Day rate contractor mortgages may be assessed on the annualised contract rate rather than accounts.
Adverse Credit Mortgages
Options for borrowers with CCJs, defaults, IVAs, or bankruptcies.
Specialist lenders consider applicants with credit issues that mainstream lenders would decline. Rates and deposit requirements depend on the severity and age of the adverse credit. Recent issues (within 1-2 years) require larger deposits and accept higher rates. After 6 years, most issues drop off your credit file.
Disclaimer: PropertyVault UK is not authorised or regulated by the Financial Conduct Authority (FCA). The content on this page does not constitute financial advice, investment advice, or mortgage advice. Always consult an FCA-regulated independent financial advisor or mortgage broker before making financial decisions. Your property may be repossessed if you do not keep up repayments on a mortgage.
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