The Basics

The majority of people wanting to enter the property market today - lottery wins aside - will need to borrow the money, which usually means taking on a mortgage.

A mortgage is not the loan itself but rather a document that puts up the property as security for the loan. This ensures the property cannot be sold without the loan being paid off and, if repayments on the loan are not kept up, the lender can go to court for a possession order.

The average length of time for a mortgage is 25 years but depending on your age and income, lenders do offer loans over other periods up to 40 years in some cases.

A mortgage has two parts: the capital - the money borrowed; and the interest - the charge made by the lender until the loan is paid back.

The mortgage is repaid with interest calculated at the lender's variable, fixed or discounted rates, depending on the type of mortgage you take out. Payment on the loan is usually made monthly. The longer the period of the loan the smaller the monthly payment. However, the cost of the loan overall will be greater because you will be paying interest for a longer period.

Unless your mortgage is portable, ie, your lender will allow you to carry it from one property to the next, any mortgage charged against that property will have to be repaid when you move house. You solicitor will arrange this. You will then have to take out a new loan for you new house.

Credit Status

To ensure you will be able to keep up the repayments on the mortgage your lender will look at your creditworthiness, using a number or means. First, the lender will score you against its own lending criteria. These differ from lender to lender but generally you may lose points against the scorecard if you are self-employed, have changed jobs frequently or very recently, are not on the electoral register or if you do not have a history of using credit. A good mortgage broker will be able to advice you whether you are likely to fail a credit rating and if so, which lenders will be more likely to accept or at least be more sympathetic to your application.

The second action the lender will take is to conduct searches into your financial background. These are normally done through credit agencies. Finally, the lender will want to see references from your employer. If you do receive a low score on the credit rating there are a number of specialist lenders who offer non-standard mortgages and will consider your application more sympathetically.

The Property Value

The lender will require a valuation survey of the property to be carried out to ensure that if sold it will cover the amount of the loan. However, some lenders are waiving the survey cost as an incentive to attract customers to their mortgage products. Other lenders don't require a survey for remortgage customers as it will have been done when the original loan was taken out.