Mortgage FAQs

Straightforward Answers to Common Mortgage Questions

Mortgages can involve a lot of terminology, different products and decisions that can affect both your monthly payments and the overall cost of borrowing.

Whether you're buying a home, moving property, reviewing your existing mortgage or simply trying to understand how mortgages work, having clear information can make the process easier to navigate.

At Cambs Ely Mortgages, we believe you should understand the mortgage you're taking on, not simply the interest rate being offered.

Below you'll find answers to some of the most common mortgage questions we receive.

Every mortgage application is different. The products, rates and borrowing options available to you will depend on your individual circumstances, lender criteria and the property involved.

Understanding Mortgages

What is a mortgage?

A mortgage is a loan secured against a property.

You borrow money from a mortgage lender and agree to repay it over an agreed period, known as the mortgage term.

Because the mortgage is secured against the property, your home may be repossessed if you do not keep up repayments on your mortgage.

How does a mortgage work?

When you buy a property using a mortgage, you normally contribute some of the purchase price yourself as a deposit and borrow the remainder from a lender.

The lender charges interest on the amount borrowed.

With a repayment mortgage, your monthly payments normally consist of both interest and repayment of the capital borrowed.

Over time, assuming all required payments are made, the outstanding mortgage balance reduces.

What is a repayment mortgage?

A repayment mortgage is designed to repay both the capital borrowed and the interest charged over the agreed mortgage term.

Each required monthly payment contributes towards the interest and repayment of the mortgage balance.

Provided all required payments are made, the mortgage should be repaid by the end of the agreed term.

What is an interest-only mortgage?

With an interest-only mortgage, the regular mortgage payment generally covers the interest charged rather than repaying the original capital borrowed.

This means the original mortgage balance will still need to be repaid, normally at the end of the mortgage term.

Lenders usually require an acceptable repayment strategy and have specific eligibility criteria for interest-only borrowing.

What does Loan to Value mean?

Loan to Value, usually shortened to LTV, compares the amount of your mortgage with the value or purchase price of the property.

For example, if a property is worth £300,000 and the mortgage is £240,000, the mortgage represents 80% of the property's value.

That would be an 80% LTV mortgage.

LTV is important because lenders often offer different mortgage products at different Loan to Value levels.

Mortgage Affordability

How much can I borrow?

There isn't one borrowing calculation that applies to every mortgage lender.

Lenders have their own affordability models and may consider your income, existing debts, regular financial commitments, dependants, mortgage term and other expenditure.

This means the amount you may be able to borrow can vary considerably between lenders.

Is mortgage borrowing based on my salary?

Your income is an important part of mortgage affordability, but lenders don't normally make their decision using salary alone.

They can also consider existing credit commitments, household expenditure, dependants and the proposed mortgage.

Some lenders may also treat bonuses, overtime, commission, benefits and self-employed income differently.

Why can one lender offer me more than another?

Mortgage lenders have different affordability calculations and lending criteria.

One lender may be comfortable with your income structure or circumstances while another may take a more restrictive approach.

This is one reason mortgage affordability shouldn't necessarily be judged based on the calculation of a single bank.

Does having loans or credit cards affect how much I can borrow?

It can.

Existing loans, car finance, credit card balances and other commitments can affect affordability because lenders need to consider your existing financial obligations alongside the proposed mortgage payment.

The effect will depend on the commitment and the lender's affordability model.

Does having children affect mortgage affordability?

Dependants can form part of a lender's affordability assessment because lenders consider household expenditure as well as income.

Different lenders may assess household circumstances differently.

Mortgage Interest Rates

What is a mortgage interest rate?

The mortgage interest rate determines how much interest the lender charges on the amount you have borrowed.

The rate can have a significant effect on your required monthly payments and the overall cost of the mortgage.

What is a fixed-rate mortgage?

A fixed-rate mortgage has an interest rate that remains fixed for an agreed initial period.

This means the required mortgage payment will generally remain the same during the fixed period, provided there are no other changes affecting the mortgage.

The main benefit is payment certainty.

At the end of the fixed period, you will normally need to review your mortgage options or move onto the lender's applicable follow-on rate if no action is taken.

What is a variable-rate mortgage?

A variable mortgage rate can change.

Depending on the type of variable rate, changes may be influenced by the Bank of England base rate or by decisions made by the lender.

If the interest rate changes, your mortgage payment may also change.

What is a tracker mortgage?

A tracker mortgage normally tracks an external interest rate, commonly the Bank of England base rate, plus or minus an agreed margin.

If the rate being tracked changes, the mortgage interest rate will normally change accordingly, subject to the terms of the product.

What is a lender's Standard Variable Rate?

A Standard Variable Rate, often called an SVR, is a variable interest rate set by the mortgage lender.

Borrowers may move onto the lender's applicable variable rate when an introductory mortgage deal ends if another arrangement hasn't been made.

The lender can normally change its Standard Variable Rate in accordance with the mortgage terms.

Two-Year vs Five-Year Fixed Mortgages

Is a two-year or five-year fixed mortgage better?

Neither is automatically better.

The appropriate fixed period depends on your circumstances, the mortgage products available and your future plans.

A shorter fixed period allows you to review your mortgage sooner, while a longer fixed period can provide payment certainty for longer.

However, a longer fixed period can also mean being subject to Early Repayment Charges for a longer period.

Why would someone choose a two-year fixed mortgage?

A borrower may prefer a shorter fixed period because they want the opportunity to review their mortgage again relatively soon.

However, this also means potentially arranging another mortgage sooner and being exposed to whatever mortgage rates and lending conditions exist when the deal ends.

Why would someone choose a five-year fixed mortgage?

A longer fixed period can provide greater certainty over the mortgage payment for a longer period.

This may appeal to borrowers who value stability and don't expect their circumstances to change significantly.

However, future plans are important because leaving the mortgage during the fixed period could result in Early Repayment Charges.

What happens if mortgage rates fall after I fix my mortgage?

Your agreed fixed rate generally continues until the end of the fixed period.

You normally cannot simply move onto a lower rate without considering the terms of your existing mortgage.

Leaving the existing product could result in Early Repayment Charges and other costs.

What happens if mortgage rates rise after I fix?

One of the main features of a fixed-rate mortgage is that the agreed interest rate remains fixed during the applicable period.

This means changes in wider mortgage rates during that period don't normally change the interest rate on your existing fixed product.

How Mortgage Rates Are Priced

Does the Bank of England base rate determine fixed mortgage rates?

Not directly.

The Bank of England base rate is important, but fixed mortgage pricing is influenced by a wider range of factors.

These can include financial market expectations, swap rates, lender funding costs, competition between lenders, risk and the lender's appetite for new business.

This is why fixed mortgage rates can sometimes increase when the Bank of England base rate hasn't changed, or decrease before the Bank of England reduces the base rate.

What are swap rates?

Swap rates are financial market rates that are commonly used as part of the pricing and funding environment for fixed-rate lending.

They are influenced by expectations about future interest rates and wider economic conditions.

Mortgage lenders consider a range of funding and commercial factors when setting their fixed mortgage rates, so there isn't a simple one-to-one relationship between swap rates and the mortgage rate offered to a borrower.

Why do mortgage rates change so often?

Mortgage lenders continually review their pricing.

Changes in funding costs, market expectations, competitor pricing, demand and lending appetite can all influence the products available.

As a result, a mortgage product available today isn't necessarily guaranteed to remain available in the future.

Mortgage Terms

What is a mortgage term?

The mortgage term is the period over which the mortgage is scheduled to be repaid.

For a repayment mortgage, the length of the term affects both the required monthly payment and the overall amount of interest you may pay.

Is a longer mortgage term better?

A longer mortgage term generally reduces the required monthly repayment because the borrowing is being repaid over a longer period.

However, this usually means paying interest for longer and can increase the overall amount of interest paid.

Is a shorter mortgage term better?

A shorter mortgage term generally means higher required monthly repayments.

However, because the mortgage is being repaid more quickly, the overall amount of interest paid may be lower.

The appropriate term needs to balance affordable monthly payments with the longer-term cost of borrowing.

Can I change my mortgage term later?

Potentially.

Depending on your lender and circumstances, it may be possible to request a change to your mortgage term or review the term when remortgaging.

Any change would be subject to the lender's requirements and may affect your monthly payments and overall borrowing costs.

Mortgage Fees & Costs

Is the mortgage with the lowest interest rate always the cheapest?

No.

The interest rate is important, but it is only one part of the overall cost.

Mortgage products can have arrangement fees, product fees, valuation fees or other charges.

Some products may also include incentives such as cashback or free standard valuation.

The overall cost should therefore be considered rather than looking at the headline rate alone.

What is a mortgage product fee?

Some mortgage products include a fee for accessing the particular mortgage deal.

This may be called a product fee, arrangement fee or completion fee depending on the lender.

Depending on the mortgage, the fee may be payable upfront or potentially added to the mortgage.

Adding a fee to the mortgage means you may pay interest on that amount.

Are there mortgages without product fees?

Yes.

Some mortgage products have no product fee.

However, a fee-free mortgage isn't automatically cheaper. The interest rate and overall cost of the mortgage should also be considered.

What is an Early Repayment Charge?

An Early Repayment Charge, commonly shortened to ERC, is a charge that may apply if you repay or change your mortgage during a specified period.

ERCs are commonly associated with fixed and other introductory mortgage deals.

They are particularly important if you're considering moving home, remortgaging or making significant overpayments.

Mortgage Overpayments

Can I pay more than my normal mortgage payment?

Many mortgage products allow overpayments.

However, the amount you can overpay without incurring an Early Repayment Charge depends on the terms of your particular mortgage.

You should check the mortgage conditions before making significant additional payments.

Why would I overpay my mortgage?

Overpayments can reduce the outstanding mortgage balance.

Depending on how they are made and how your lender applies them, this can potentially reduce the amount of interest paid and may help you repay the mortgage sooner.

Should I use all my savings to overpay my mortgage?

Not necessarily.

Reducing mortgage debt can be beneficial, but maintaining accessible savings for emergencies and other financial priorities can also be important.

Your wider financial circumstances should be considered rather than looking at the mortgage in isolation.

Mortgage Applications

What documents are normally required for a mortgage?

The documents required depend on your circumstances and the lender.

Common requirements can include proof of identity, proof of address, bank statements, payslips, evidence of self-employed income, evidence of deposit and details of existing financial commitments.

Additional documentation may be requested depending on the application.

Why does the lender want my bank statements?

Bank statements can help lenders verify income, expenditure and account conduct.

They may also be used to evidence the source of funds being used in the transaction.

Requirements vary between lenders.

What is mortgage underwriting?

Underwriting is the lender's assessment of your mortgage application.

The lender reviews the information provided to determine whether the application meets its lending criteria.

The underwriter may request additional documents or clarification before making a decision.

How long does a mortgage application take?

There isn't one reliable timeframe.

The time required can depend on the lender, complexity of the application, valuation, property, underwriting workload and whether additional information is requested.

A mortgage application is also only one part of a property transaction. The legal process can operate on a different timetable.

Mortgage Valuations

Why does the lender value the property?

The lender needs to determine whether the property provides acceptable security for the mortgage.

The valuation helps the lender assess the property's value and suitability for lending purposes.

Is a mortgage valuation the same as a survey?

Not necessarily.

A lender's mortgage valuation is primarily for the lender's benefit.

It shouldn't automatically be treated as a detailed assessment of the property's condition.

A buyer may decide to arrange a separate survey to obtain more detailed information about the property.

What is a down valuation?

A down valuation occurs when the lender's valuation is lower than the purchase price or expected property value.

This can affect the Loan to Value and potentially the amount the lender is prepared to advance.

Mortgage Offers

What is a mortgage offer?

A mortgage offer is the lender's formal offer to provide the mortgage subject to the terms and conditions contained within it.

It normally follows the lender's assessment of both the borrower and the property.

Does a mortgage offer guarantee completion?

A mortgage offer is an important milestone, but the transaction still needs to proceed through the legal process and the conditions of the mortgage offer must continue to be satisfied.

Material changes in your circumstances before completion should be disclosed.

Can I take out new credit after receiving my mortgage offer?

You should be cautious about taking on significant new borrowing before your mortgage completes.

New loans, car finance, credit cards or other financial commitments can change your affordability and overall financial position.

If you're considering taking new credit, it is sensible to discuss it with your mortgage adviser first.

Moving Home With a Mortgage

Can I move house if I'm still in a fixed-rate mortgage?

Potentially, yes.

However, your existing mortgage may have Early Repayment Charges and these need to be considered before deciding how to proceed.

Some mortgages may also be portable.

What does porting a mortgage mean?

Porting generally refers to transferring an existing mortgage product to a new property.

This doesn't mean the mortgage automatically moves with you.

You normally need to make a new application and satisfy the lender's current affordability, credit and property criteria.

What if I need to borrow more when I move?

If your existing mortgage is portable but you require additional borrowing, the lender may potentially provide the additional amount on a separate product.

This can result in different parts of the mortgage having different interest rates and product end dates.

Remortgaging

What does remortgaging mean?

Remortgaging generally means replacing your existing mortgage with a new mortgage, often with a different lender.

People remortgage for various reasons, including reviewing their interest rate, changing their mortgage structure or borrowing additional funds where appropriate.

Do I have to change lender when my mortgage deal ends?

No.

Your existing lender may offer alternative products through a product transfer.

Alternatively, you may consider remortgaging to another lender.

The appropriate option depends on the products available, associated costs and your circumstances.

When should I start reviewing my mortgage?

It can be sensible to begin reviewing your options before your existing mortgage deal ends.

This gives you time to understand the options available and consider whether remaining with your existing lender or moving elsewhere may be appropriate.

The appropriate timing depends on your existing mortgage and the options available at the time.

Credit & Mortgages

Do I need a perfect credit score for a mortgage?

No.

There isn't one universal credit score used by every mortgage lender.

Lenders use their own credit assessment and lending criteria.

Your credit history, existing commitments and wider circumstances can all influence the outcome.

Can I get a mortgage after missed payments?

Potentially.

The type of missed payment, amount involved, when it happened and your subsequent credit conduct can all be relevant.

Different lenders have different criteria.

Can I get a mortgage with a default or CCJ?

Potentially.

Defaults and County Court Judgments don't automatically make obtaining a mortgage impossible.

The amount, age, status and circumstances surrounding the credit issue can all be important when considering lender options.

Self-Employed Mortgages

Can self-employed people get mortgages?

Yes, subject to lender criteria and affordability.

The main difference is often how income is evidenced and assessed.

Do all lenders assess self-employed income in the same way?

No.

Lenders can take different approaches depending on whether you're a sole trader, partner, contractor or limited company director.

The income figures used for affordability can therefore vary between lenders.

Do I need several years of accounts?

Not necessarily.

Many lenders prefer an established trading history, but criteria differ and some lenders may consider applicants with a shorter trading history.

The options available will depend on your individual circumstances.

Using a Mortgage Adviser

Why use a mortgage adviser instead of going directly to a bank?

Going directly to a bank normally means considering the products and lending criteria available from that particular lender.

A mortgage adviser can assess your circumstances and research options from the lenders available through their panel.

This can be particularly useful because mortgage lenders have different affordability calculations, products and lending criteria.

How many lenders does Cambs Ely Mortgages have access to?

Cambs Ely Mortgages has access to more than 200 lenders, including high-street banks, building societies and specialist lenders.

This allows us to research suitable mortgage options based on individual circumstances rather than relying on the criteria of one lender.

Does Cambs Ely Mortgages charge for the initial conversation?

There is no charge for the initial conversation.

This gives us an opportunity to understand your circumstances and what you're trying to achieve before you decide whether to proceed.

What does Cambs Ely Mortgages charge for arranging a mortgage?

A fee may be payable for arranging your mortgage.

Your adviser will confirm the amount before you choose to proceed.

Our mortgage arrangement fee is usually between £295 and £995, with the precise amount depending on your circumstances and the complexity of the work involved.

Have More Mortgage Questions?

Mortgages can appear straightforward on the surface, but small differences in interest rates, fees, mortgage terms, lender criteria and product features can have significant implications over time.

Our Mortgage & Home Buying Guides provide more detailed explanations of subjects including mortgage affordability, mortgage rates, mortgage terms, fees, overpayments, credit, valuations, surveys and the mortgage process.

Our Educational Videos also provide straightforward explanations of common mortgage topics if you prefer to learn by watching.

Need Advice About Your Mortgage?

Whether you're buying a property, moving home, approaching the end of your existing mortgage deal or simply trying to understand your options, the starting point is understanding your circumstances and what you're trying to achieve.

Cambs Ely Mortgages is based in Cambridgeshire and provides mortgage and protection advice to clients in Ely, Cambridge, Cambridgeshire, East Anglia and throughout England through convenient remote appointments.

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Your home may be repossessed if you do not keep up repayments on your mortgage.

Information on this page is for general guidance and does not constitute personalised mortgage, protection, insurance, tax, legal or financial advice. Mortgage availability, affordability, rates and eligibility depend on individual circumstances, lender criteria and the products available at the time.