What is a mortgage?
A mortgage is a loan taken out by a homebuyer to borrow money so that they can purchase a home or land. You’ll have a legal agreement with the lender, which includes terms like how much you’ll have to repay, how often you’ll have to make repayments, and whether there are any penalties for early, late or defaulted payments.
You’ll normally be required to put down a deposit for the property, with the rest of the value to be paid out in instalments. There’s usually an interest charge on the repayments. There are different types of mortgages on the market, and deals for what kind of loan you might be able to get can vary. These depend on factors like how much you’ll be able to put down upfront for the deposit, what the lender thinks your affordability is, and how creditworthy they think you are.
Mortgages and your credit report
You’ll typically apply for a mortgage from bank or building society. The lender will look at a range of factors to assess whether you can afford it, and how risky it’ll be for them to provide you with the loan to purchase your home. This can include information that’s found on your credit report, which shows them your borrowing history. This gives them information on how responsible you’ve been at repaying other loans. Using this information as well as other data they may have about you, the lender can assess whether you’re likely to repay a loan, and can decide what sort of deal to offer you.
If you’re planning on applying for a mortgage, you may want to check your Equifax Credit Report & Score in advance. Free for the first 30 days then £7.95 monthly, it gives you a view of your borrowing history, which could help you decide whether you need to improve your habits before applying for a home loan. It also gives you access to your Equifax Credit Score, which indicates how creditworthy lenders may find you. Based on the contents of your credit report, you may wish to take steps to improve your credit rating before applying for a mortgage. You can read more about mortgages here.
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- Help to Buy: Shared Ownership
- What is a Help to Buy: ISA?
- Resources for first-time buyers
- Buy-to-let mortgages explained
- What is remortgaging?
- How mortgage repayments work
- Understanding Mortgages
- Types of Mortgages
- Mortgage rates & decision
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