Understanding Mortgages: What You Need to Know Before You Borrow

Mortgage Basics: The Process, the Rates, and What Really Affects What You Can Afford

When Rachel and Marcus came to us for help buying their first home in Ely, they were excited — but overwhelmed.

They’d been saving for years, had found a lovely semi-detached house near the local school, and were finally ready to move forward. But every conversation about interest rates, terms, and affordability felt like it was in another language.

So we did what we always do: we slowed things down and explained it all in real-world terms.

🧱 Step One: How Does the Mortgage Process Work?

Whether you’re buying your first home or remortgaging, the steps are broadly the same:

1. Speak to a broker (like us!)
   We assess your income, credit, goals, and budget.

2. Get an agreement in principle
   This is a soft credit check and early confirmation of what you can borrow.

3. Make an offer on a property
   Once accepted, you can formally apply for your mortgage.

4. Submit your mortgage application
   Lenders will verify your documents (income, ID, deposit, etc.)

5. Valuation and underwriting
   The lender checks the property’s value and signs off on your affordability.

6. Offer issued → Solicitor work → Completion
   Then you get the keys — and the real adventure begins!

💸 Mortgage Rates: What Do They Really Mean?

Mortgage rates determine how much interest you pay on the loan. They’re influenced by:

• The Bank of England base rate

• Your deposit size

• The type of mortgage deal (fixed, tracker, variable)

• Your income and credit profile

At the time of writing, average fixed rates are around 4–5%, but those numbers change with the market — which is why reviewing your options regularly matters.

📊 2-Year vs 5-Year Fixed: Which Is Better?

This is one of the most common questions we get.

2-Year Fixed Deals

• Usually have slightly lower rates than longer terms

• Gives you more flexibility if you plan to move or refinance soon

• But you’ll need to review and remortgage sooner

✅ Best for: short-term planners or those expecting financial changes

5-Year Fixed Deals

• Often slightly higher rates, but protects you from rising rates longer

• Helps with budget stability — your payments won’t change for 5 years

• May come with bigger early repayment charges if you want to exit early

✅ Best for: homeowners who want certainty, especially in volatile rate markets

Rachel and Marcus chose a 5-year fixed — their first baby was on the way, and they valued consistency over small rate differences.

🧮 Term Length: 25 Years vs 35 Years — What’s the Difference?

This refers to the overall repayment period — not the fixed deal length.

• Shorter term = higher monthly payments but less total interest paid

• Longer term = lower monthly payments but more interest over time

Example:

Let’s say you borrow £200,000 at 5% interest.

• Over 25 years: ~£1,169/month

• Over 35 years: ~£1,009/month

That’s a £160/month difference — which could affect whether your mortgage is approved under affordability checks.

BUT… that 35-year deal means paying thousands more in total interest over time.

✅ That’s why term length is a balancing act between affordability now vs cost over time.

🏡 So… What Affects What You Can Afford?

Lenders will look at:

• Your income (employed or self-employed)

• Your monthly outgoings (credit cards, car finance, childcare and other credit commitments)

• The interest rate on the mortgage

• The term length (shorter term = higher monthly cost)

• Whether you want a fixed, tracker, or variable deal

• Your credit score and past history

In short: higher rates or shorter terms make the monthly payment higher, which could reduce how much you can borrow.

Sometimes, switching from a 2-year to a 5-year fix, or extending the term slightly, can be the difference between being approved or not.

💡 What Should You Do Before Applying?

1. Get a clear view of your finances
   Know your monthly spend and any debt.

2. Speak to a broker early
   We can help you understand what’s realistic and what’s not.

3. Don’t just go to your bank
   They can only offer their own products. We search over 200 lenders — including ones who specialise in unique situations.

🔑 Final Thought

Mortgages aren’t just numbers on a screen — they’re the foundation of your home, your lifestyle, and your future. Understanding how rates, terms, and structure affect your loan can help you make confident, educated decisions.

Whether you're looking to buy your first home, remortgage, or just want to learn more — we’re here to guide you, clearly and calmly.

📞 Want to understand your mortgage options better? Book a no-obligation call today