Home mortgage calculator

A mortgage is a loan secured against a property, enabling you to purchase it. The lender will charge you interest in exchange for lending you the money. You’ll need to repay the original loan amount (capital) plus the interest charge monthly over an agreed period until all the debt is repaid.

During this time, the lender has a charge over the property. In the worst-case scenarios, failing to keep up repayments on your mortgage or breaching your mortgage conditions can lead to your lender repossessing the property. The lender can then sell it to recoup the money you borrowed.  

How much you can borrow depends on the lender and many other factors. These factors include but are not limited to, your deposit, the LTV, your income, your disposable income after committed outgoings and your credit profile.

As a rough guide, most lenders calculate affordability based on 4 to 5 times your annual income (or combined annual income if it’s a joint application). You can check how much you can borrow using our simple calculator.

Generally, you need a minimum deposit of 5% of the value of the property you wish to buy. 

For example, if you wanted to buy a property worth £200,000, you’d need a minimum deposit of £10,000.

Generally speaking, the more deposit you can invest in the purchase, the better the mortgage interest rates you’ll have access to.

LTV is the percentage of the amount of borrowing against the property's value.

For example, if you purchase a property valued at £200,000, with a £10,000 (5%) deposit, you would need a 95% LTV mortgage to complete the purchase.

Simply put, a remortgage is when you refinance your current mortgage to a new mortgage, typically with a new lender.

Usually, you complete a remortgage when your existing fixed-rate mortgage deal has ended. This is because, at the end of a fixed term, you’ll start paying your lender’s standard variable rate (SVR), which is nearly always more expensive than the interest rate you were paying or can secure with a new deal.

Other reasons you may want to remortgage are if your financial circumstances change or if you want to borrow more to pay for home improvements. 

You can remortgage with your existing lender (a product transfer) or with a new lender, depending on which offers you the best deal. Our experienced team of residential mortgage brokers can compare all the rates available to you and secure you the most suitable one.

It usually takes between two and six weeks to get a mortgage offer. However, this does depend on the lender and the complexity of your application. 

After you’ve got your mortgage offer, it can take another one to three months before you complete. Again, this can vary depending on how many other properties are in the chain or if there are any unexpected complications in the legal process. 

Most mortgage offers are valid for three to six months, depending on the lender.

To prove your income on your mortgage application, you’ll need:

• 3 – 6 months’ payslips, and sometimes your P60 for PAYE employees
• Your most recent SA302 tax calculation and tax year overview, or two years’ trading accounts if you’re self-employed
• 3 – 6 months’ bank statements

Some lenders may require other documentation, but this is a standard guide. Your dedicated MFB broker will know what additional documentation different lenders require.

Each lender will have different fees, but as a guide, be prepared to pay for the following:

• Lender arrangement fee – a fee most lenders charge for arranging your mortgage. You’ll either need to pay this upon completion, or you can add it to the loan (which means you’ll pay interest on it). Arrangement fees are usually a fixed amount for homebuyer mortgages but can also be a percentage of the loan. 
• Legal fees –conveyancers charge varying amounts for completing the legal work required for mortgages. If you don’t have a solicitor, ask your dedicated MFB broker for a recommendation.
• Stamp Duty – if you’re purchasing a property, you’ll need to pay Stamp Duty Land Tax (SDLT) on purchases (or transfers of equity) over £250,000 or £425,000 for first-time buyers. Use our SDLT calculator to find out how much you’ll need to pay.

Conveyancing is the term often used to refer to the legal work completed by a conveyancer or solicitor when purchasing or selling property. It’s an essential part of the mortgage process. If you don’t already have a solicitor, we can help you find one. Ask your MFB broker for assistance. 

An ERC refers to the fee you’d need to pay your lender if you repay your mortgage agreement early during the initial period, or you exceed the agreed overpayment limits during this period.

For example, if you took a 3-year fixed mortgage, your lender may charge you a 3% fee of the amount outstanding if you repay the loan in the first year of the 3-year fixed-rate period, 2% until the end of year 2 and 1% until the end of year 3 from drawdown.

A mortgage in principle (MIP), decision in principle (DIP) or agreement in principle (AIP) are all different names for the same thing. It is an indication from a lender of how much you could borrow from them based on the information provided. AIPs are based on basic income information and sometimes a light credit check.

Getting an AIP is helpful as it gives you a better idea of the budget you’ll have to purchase a home and demonstrates to estate agents that you’re financially viable and serious about buying.

Most home mortgage terms are between 25 and 35 years. The shorter the mortgage term, the less interest you’ll have to pay, but the more expensive your monthly repayments will be. Therefore, the length of your mortgage term is often determined by how much you can afford to spend on your mortgage every month without putting yourself under significant financial pressure.

Your mortgage agreement will require you to have a buildings insurance policy as a minimum. However, it’s highly recommended that you take out a comprehensive home insurance policy to cover both the property and the contents. Our team can help you find a suitable home insurance policy.

Life insurance, or ‘Mortgage protection’, is not a legal requirement of your mortgage agreement. However, it is highly advisable to take out a life insurance policy to protect the people you live with from significant financial strain should you pass away. 

Similarly, Mortgage payment protection to ensure you can maintain your repayments in the event of being unable to work is also advisable. We can help you find a policy that suits your needs; just ask your dedicated MFB broker.

If you want to rent out the property you live in, you’ll either need:

• Consent to let from your existing home mortgage lender
• A buy to let mortgage

You must seek permission from your existing mortgage lender before renting out your property, as you will likely breach your mortgage agreement if you don’t. This means the lender can recall the full loan early, putting you in a very stressful situation. Remember, if tenants can find your property up for rent, so can your lender.

A less-than-perfect credit score doesn’t mean you can’t get a mortgage. However, it will depend on the severity of your credit issues, the types of defaults you’ve had and how recently you had them.

Lenders have varying tolerances towards bad credit, and some lenders have specific mortgage product ranges to help people with credit issues.

While having bad credit might not prevent you from getting a mortgage, it will likely make your mortgage interest rate more expensive as lenders view you as a higher risk and impact your affordability assessment.

If you can, it can be highly beneficial to overpay your mortgage. By overpaying your mortgage even a little bit, you can reduce the total term of your mortgage and, therefore, the total amount of interest repaid.

You need to check whether your mortgage agreement allows for overpayments. Most home mortgages allow a 10% yearly overpayment, but not all. Our mortgage experts will ensure you know the options available to you, and your mortgage offer document will confirm this. 

If you know you want the option to overpay on a new mortgage, let your expert MFB broker know, and they will include this criteria when sourcing the best rates for you.