In the UK, buying a home is one of the biggest financial steps most people take. For the vast majority, it’s not possible to pay the full price upfront. This is where a mortgage comes in. At Kings Gate Finance, we help potential homeowners, landlords, and property investors understand and secure the right mortgage deals. In this guide, we’ll explain what a mortgage is in simple terms, how it works, the different types available, and why it matters to you.

The Basics: What Exactly is a Mortgage?

A mortgage is a loan specifically designed to help you buy property or land. You borrow money from a lender, usually a bank or building society and agree to pay it back over a set period, typically 25 to 35 years depending on the borrower’s age. The property you’re buying acts as security for the loan. This means if you fail to keep up with repayments, the lender can repossess the home to recover their money.

Think of it like this: you put down a deposit (say, 10% of the property price), and the mortgage covers the rest. Each month, you make repayments that include part of the borrowed amount (the capital) plus interest charged by the lender.

Mortgages are regulated by the Financial Conduct Authority (FCA) in the UK, ensuring lenders treat customers fairly. At Kings Gate Finance, we’re authorised and regulated by FCA, so you can trust our advice is professional and tailored to your needs.

How Does a Mortgage Work?

Let’s break it down step by step:

1. Application and Approval: You apply through a broker like us or directly with a lender. They check your income, credit history, and affordability. This is called a ‘Decision in Principle’ (DIP), which shows sellers you are serious.
2. Valuation: The lender values the property to confirm it’s worth the price.
3. Offer: If approved, you get a formal mortgage offer.
4. Completion: On moving day, the mortgage funds are transferred, and you get the keys.
5. Repayments: You pay monthly. Early on, most goes towards interest; later, more reduces the capital.

Your monthly payment depends on:

• The loan amount
• Interest rate
• Term length
• Type of mortgage

For example, on a £200,000 mortgage at 4% interest over 25 years, repayments might be around £1,055 per month (capital and interest repayment). Use online calculators, or speak to us for precise figures.

Types of Mortgages in the UK

Not all mortgages are the same. Here are the main types:

1. Repayment (Capital and Interest)

This is the most common one. You pay off interest and capital each month, so the mortgage is fully cleared by the end of the term. Safe and straightforward – ideal for first-time buyers or families.

2. Interest-Only

You only pay the interest monthly. The capital is repaid at the end, often via savings, investments, or selling the property. Riskier, and lenders are stricter. Popular with buy-to-let investors.

3. Fixed-Rate

Interest rate stays the same for a set period (e.g., 2, 5, or 10 years). Gives payment certainty. Great if you like budgeting predictability, especially with Bank of England base rate changes.

4. Variable Rate

Rates can change and this includes:

• Tracker: Follows the Bank of England base rate plus a margin (e.g., base + 1%).
• Discount: Lender’s standard variable rate (SVR) minus a discount for a few years.
• Standard Variable Rate (SVR): Lender’s default rate, often higher. Many end up here after fixed deals expire.

5. Specialist Mortgages

• Buy-to-Let (BTL): For rental properties. Interest-only common; rental income must cover repayments (usually 125-145%).
• Shared Ownership: Buy a share of a property; mortgage on your part, rent on the rest.
• Income Booster Mortgage: Also known as Joint Owner Sole Proprietor ownership, families and friends can support you as a guarantor to boost your lending.  

At Kings Gate Finance, we specialise in residential, buy-to-let, commercial mortgages and all other specialist mortgages. We also provide service and support to UK citizens overseas (especially military clients). 

Key Mortgage Terms You Should Know

• Loan to Value (LTV): Percentage of property price you borrow. Lower LTV (e.g., 60%) means better rates but needs a bigger deposit.
• Deposit: Usually 5-20% of purchase price. 5% possible but rates are higher.
• Affordability Checks: Lenders conduct a stress-test to identify if you can afford payments if rates rise (e.g., +3%).
• Early Repayment Charge (ERC): Fee for paying off early, common on fixed deals.

Why Get a Mortgage Through a Broker?

Shopping alone means missing deals. Whole-of-market brokers like Kings Gate Finance access thousands of products from over 90 lenders, including exclusives. We specialise in Income Booster Mortgage, save you time, explain jargon, and negotiate rates. 

Beyond the actual mortgage repayments, there are other costs involved and it may vary, your lender or the mortgage broker can provide you the exact costs involved through the process. 

• Arrangement fee
• Valuation fee
• Legal fees 
• Stamp Duty: Varies by price and buyer status 
• Insurance: Buildings mandatory; life, critical illness, and income protection are optional but recommended

Remortgaging and Beyond

A mortgage isn’t forever. Buyers have to remortgage every 2-5 years for better rates, depending on their term, release equity for home improvements, or consolidate debts. 

Final Thoughts

A mortgage is more than a loan; it’s the key to homeownership or investment growth. Whether you’re a first-time buyer or an investor, understanding basics empowers better decisions. At Kings Gate Finance, we simplify the process and handle all the complexity surrounding mortgages so you can focus on something else. 

Kings Gate Finance Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Your home may be repossessed if you do not keep up repayments on your mortgage.