Compare Residential Mortgages

Residential mortgages are available on all residential properties. Compare the latest interest rates and other important features of residential mortgages by using our mortgage comparison tool.

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Think carefully about securing debt against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

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Information written by Brean Horne Last updated on 12 January 2022.

What is a residential mortgage?

A residential mortgage is a loan for borrowers who would like to buy a home they intend to live in. Lenders agree to loan a certain amount of money that must be repaid within an agreed period of time. Most residential mortgages last around 25 years, but most lenders offer loans for longer or shorter terms.

Borrowers must repay the mortgage loan each month with interest added on top. Residential mortgages are secured, which means that if you miss repayments the lender may be able to repossess your home to recover any unpaid debt.

Types of residential mortgage rates

The most common types of residential mortgage rates are:

  • Fixed-rate: The interest rate for the mortgage is fixed for a set period of time. This means that your monthly payments won’t change until the fixed term ends.
  • Tracker rate: The interest rate follows an external rate, which is usually linked to the Bank of England’s base rate for two to five years. This means that your monthly repayments may change each month.
  • Standard variable rate (SVR): When your initial mortgage deal ends, lenders usually charge a default interest rate called an SVR that may change from month to month. This means your repayments might not stay the same.

Is a residential mortgage best for me?

Whether a residential mortgage is best for you will depend on your reason for buying a property. A residential mortgage is the best option if you only intend to live at the property you want to buy. If you want to use the property to run a business, you may need to apply for a commercial mortgage instead.

Can I get a second residential mortgage?

You can get a second residential mortgage to buy another property you intend to live in. For example, if you wanted to get a second residential mortgage to buy a holiday home and have no plans to rent it out. As with your first mortgage, you’ll need to pass a lender’s eligibility and affordability criteria to be approved for a loan. Most lenders ask for a higher minimum deposit of 15% of the property’s value on second homes.

What is the difference between residential and commercial mortgages?

The main difference between residential and commercial mortgages is your reason for buying a property. A residential mortgage is a loan for a property you intend to live in, whereas a commercial mortgage is for a property you intend to use for business purposes. Check out our FAQs if you intend to both live and work at a property.

Residential Mortgages FAQs

What is a residential mortgage?

Yes, it is possible to have two residential mortgages for separate properties. You’ll have to meet a lender’s eligibility and affordability criteria to be approved for a second mortgage. Lenders tend to ask for a larger deposit of at least 15% of the property’s value.

Can I rent my house out on a residential mortgage?

You should get a buy-to-let mortgage if you want to use a property as a source of income rather than to live in. However, in some cases, a lender might allow you to rent out a spare room or all of your house for short periods of time under short-term occupancy rules.

It’s important to check the terms of your mortgage and get permission from your lender before renting out all or part of your home. And if anything is unclear, get in touch with your lender to find out more. Renting out your home without permission may be classed as mortgage fraud. Mortgage fraud is a serious offence, which could result in legal action against you with a possible custodial sentence.

Can I change my residential mortgage to a buy to let?

Yes, you can change your residential mortgage into a buy-to-let mortgage, but you’ll need to get permission to switch from your lender first. If your lender rejects your application to switch, you may be able to remortgage with a new lender instead.

» COMPARE: Buy-to-let mortgage deals

Can a business get a residential mortgage?

It depends. Residential mortgages are designed for buyers who intend to live in a property. You should get a commercial mortgage for a property that you plan on using for business purposes. There will be cases where your business is in your home, for example, if you run a B&B or offer beauty treatments. In these cases whether you get a residential or commercial mortgage will depend on how much of the property is used for living and how much is used solely for business purposes.

Typically, if the area used for living purposes is more than 40%, you should get a residential mortgage. It’s important to get mortgage advice before borrowing for a property if you intend to run a business out of it, to avoid breaching the terms of your loan.

Can I get an interest-only residential mortgage?

Yes, interest-only mortgages are available for people buying residential homes. Over the years it has become more difficult to get an interest-only residential mortgage. And most lenders will require borrowers to have a plan for repaying the debt. Interest-only mortgages are only available on smaller loans.

Can I use a residential mortgage to buy a property for rental?

No. If you wish to buy a property to generate rental income from tenants, you must apply for a buy-to-let mortgage instead.

How do residential mortgages work?

With a residential mortgage, you’ll usually need to put down a deposit for at least 5% of the property’s value. Then you apply to borrow the rest from the lender. Once a lender approves your loan you’ll have to pay it back in monthly instalments with interest. It is worth remembering that low deposit mortgages often will come with a higher interest rate due to the risk that they may pose to the lender.

How can I determine the size of a mortgage loan?

You can use a metric called LTV (loan-to-value) to work out the size of a mortgage. LTV is shown as a percentage and lets you know how much of the property value you are borrowing from the bank. For example, 90% LTV means that you’re borrowing 90% of a property’s value from a lender, while 50% LTV means that you’re only borrowing 50% of a property’s value.

Typically, mortgages with lower LTVs are cheaper because you’re borrowing less from a provider. They also mean that you own more of your property outright.

Are there ways to keep interest low on my residential mortgage?

You may be able to keep interest rates on your residential mortgage lower by opting for a fixed-rate deal. A fixed-rate mortgage offers a set interest rate that doesn’t change for a certain period of time. The majority of lenders offer two- or five-year fixed-rate mortgage deals, but some providers offer up to 10 years.

What is APRC?

The annual percentage rate of charge (APRC) is a metric used to measure the overall cost of your mortgage. The APRC includes the rate of interest you can expect to pay, plus additional fees and costs. It gives you the chance to make an easy, like-for-like comparison between different deals.

What is SVR?

The standard variable rate (SVR) is the default rate interest rate set by your lender. After your introductory mortgage deal expires, you’ll likely be switched to an SVR mortgage unless you can remortgage for a better deal. SVR mortgages tend to be more expensive than fixed-rate deals.

What is a discounted variable residential mortgage?

Discounted variable residential mortgages require you to repay your mortgage with a rate of interest set slightly below the lender’s SVR. This means interest will be paid at a rate set at the lender’s discretion.

Can I overpay on my residential mortgage?

Overpayment is often allowed on residential mortgage deals and serves as an effective way to reduce future mortgage payments, as you pay the loan off ahead of time. Providers often allow overpayment up to a certain level, before an early repayment charge (ERC) becomes applicable but always check with your mortgage provider.

What does an early repayment charge cost?

Early repayment charges last during the deal period and vary between lenders and depend on the size of your mortgage. So always check terms and conditions so you’re aware of the costs associated with redeeming your mortgage early.

Where is the best place for me to compare residential mortgages?

Our mortgage comparison tool helps you compare residential mortgages to find affordable deals that might be suitable for you.

About the author:

Brean is a personal finance writer at NerdWallet. She covers a range of financial topics and has written for consumer titles including Which?, Moneywise and The Motley Fool. Read more

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