A residential mortgage is a large long term loan secured against a property by a single or multiple owners. Whether you are a first time buyer, moving home or re-mortgage, this is the type of mortgage you will need. With a residential mortgage the property has to be used as a residence by the borrowers. You will not be allowed to rented out to tenants or used for commercial purposes.
Residential mortgages usually require minimum 10% deposit of the purchase price and 90% can be borrowed from the Lender. The amount you can lend will be determined based on your income and affordability. All the lenders have their own way of doing affordability calculation and the amount can be borrowed varies lender to lender.
For example, if your purchase price is £300,000 you are required to provide at least £30,000 and rest of £270,000 can be borrowed form the Lender considering you are qualified for a residential mortgage. However, there are some lenders who lends up to 95% of the property value. Also if you are a First Time Buyer and using government’s Help to Buy scheme then you may only need to provide 5% deposit.
Usually your capital repayments will consist of capital and interest. Every month you will be repaying a small proportionate of your mortgage balance as well as interest. End of the term your mortgage would be paid in full providing you keep up with your repayments. Not being able to meet these repayments could result in losing your home. These repayments will increase or decrease with the amount of interest being charged.
Interest will be charged on the amount of the mortgage owed. It is charged as an annual percentage rate against the value of your debt.