How do you apply for a mortgage in the United Kingdom?

A mortgage can be obtained directly from a bank or building society. You can also use a mortgage broker, independent financial adviser, or mortgage broker to compare different mortgages in the UK.

Check with the three credit reporting bureaus – TransUnion, Equifax, and Experian – and request a free credit report before applying for a UK mortgage to ensure there are no reporting errors.

It’s a good idea to then consult with a few mortgage brokers to help you select the best mortgage option. These can include bank or building society advisers, as well as an independent financial adviser or mortgage broker.

Then you must begin gathering the documentation that your lender may require, such as:

  • Paystubs from the previous three months
  • Proof of residency in the United Kingdom (if applicable)
  • Your employer’s P60 (annual UK tax summary) form
  • Bank statements for three to six months
  • Proof of any pension or insurance benefits received in the United Kingdom
  • If you are self-employed in the UK, you should have two to three years of verified accounts.
  • Tax returns (both current and previous years)
  • Utility bills in the United Kingdom today
  • Passports or other forms of identification are required.
  • Statements of household cash flow

In general, it takes 14-42 days to process a mortgage application. This can be extended for more complex applications.

Expat-friendly mortgage lenders in the United Kingdom

The majority of UK homebuyers obtain their mortgage from one of the country’s many retail banks. Several UK banks and building societies provide both fixed-rate and variable-rate mortgages. These are some examples:

  • Barclays
  • Halifax
  • NatWest
  • Santander

Locating a Mortgage Advisor in the United Kingdom

In the United Kingdom, there are numerous mortgage advisers, mortgage brokers, and mortgage advice firms. If you want to work with an independent broker, make sure they are on the Financial Conduct Authority

Assistance is available for obtaining a mortgage in the United Kingdom?

There are several government programs available to assist people in purchasing a home in the United Kingdom. They are as follows:

  • Shared Ownership is a scheme in which you buy a portion of a property and rent the remainder at a reduced rate. This is available to households earning less than £80,000 (or £90,000 in London). There are special shared ownership schemes available to assist older people and people with disabilities in purchasing a home. The scheme is available throughout the United Kingdom.
  • Starter Home Scheme: This scheme allows buyers to save between 30-50% of the market value on a new house or a house sold by someone who previously benefited from the scheme. Only available in the United Kingdom.
  • Right to Purchase: Allows council tenants to purchase their council home at a reduced price. The size of the discount is determined by the location and type of property. This is available throughout the United Kingdom.

Aside from these government-backed schemes, an increasing number of fintech firms can assist you in getting on the UK property ladder. Proportunity and Habito are two of these companies. These fintech firms use technological innovations to assist you in obtaining the mortgage you require.

It is more difficult to obtain a mortgage in the UK if you have poor credit. In this case, your best bet is to work on improving your credit score. Some lenders, however, provide what are known as bad credit mortgages. These are typically offered at subprime rates with a deposit of at least 25% (sometimes 30-35%).

How much does a mortgage cost in the United Kingdom?

Aside from mortgage interest rates, there are several other associated fees that can add a few thousand pounds to total costs. These charges include:

Type of feeExplanation of feeCost
Arrangement feeThis is an administration fee. Lenders charge this for setting up the mortgage.0–3% of your loan
Booking feeThis is an upfront fee for booking your mortgage. It usually isn’t refundable if the mortgage falls through or you pull out.£100–200
Valuation feeThis pays for the lender to survey to value the property. Costs can vary greatly depending on property value. Some lenders may agree to waive this fee or include it in the administrative costs.Free of charge or between £150–1,500
Survey feeIn addition to the valuation fee, you can pay to have a private survey carried out if you wish.£400–1,500
Transfer feeAlso sometimes called CHAPS (Clearing House Automated Payment System), this fee pays for your mortgage provider to transfer the money to your solicitor.£25–50
Higher lending chargeThis only applies where a small deposit is paid. It covers the lender’s insurance if you can’t pay back the mortgage and have to sell at a loss.Around 1.5% of your loan
Solicitor feeThis is the cost of your solicitor. Most solicitors will charge a percentage of the mortgage price although some may agree to a separate fixed fee. Solicitors may include the stamp duty costs in their legal fees bill.£500–1,150
Mortgage broker feeAn optional fee if you hire a broker to cover services.Around 0.3% of your loan

Mortgage Fees in the United Kingdom

The fees listed above must be paid upfront or shortly after obtaining your UK mortgage. After repaying your mortgage, you may be required to pay an exit fee. This is true whether you pay off your mortgage early or on time.

Some lenders include this fee in their upfront/administrative fees; check with them if you’re unsure. If you pay off your mortgage early, your lender may charge you an early repayment fee. This is typically between 1-5% of the early repayment value.

Mortgage tax breaks in the United Kingdom

Stamp Duty Land Tax is the most expensive additional cost of purchasing a home in the United Kingdom. In Scotland, it is known as land and buildings transaction tax (LBTT), and in Wales, it is known as land transaction tax (LTT).

Stamp duty is payable by all owner-occupiers on any property worth more than £250,000 in England or Northern Ireland (£145,000 in Scotland or £225,000 in Wales). Depending on the purchase price, the tax payable ranges from 2% to 12%. It is usually due within 14 days of the completion of your property purchase.

Buyers of a second home or buy-to-let property must pay a 3% surcharge on top of the standard rate.

Non-resident buyers of residential property in England and Northern Ireland will have to pay two percentage points more in stamp duty as of October 2021. Non-residents purchasing property in Wales and Scotland are exempt from this rule.

Capital gains taxation

If you sell a non-primary residence, you must pay capital gains taxes on any profit made within 60 days of the sale (both for rental and non-rental properties).

In April 2015, changes to the capital gains policy went into effect. Non-residents previously had no capital gains liability. Non-residents, on the other hand, only need to calculate gains made since April 2015.

Tax implications for buy-to-let mortgages

Landlords must pay 20% tax on buy-to-let income between £12,571 and £50,270 beginning in July 2023. They must pay 40% tax if their income exceeds this amount.

Property insurance in the United Kingdom

Although it is not a legal requirement, most lenders in the UK require building insurance when taking out mortgages. You should budget for this. This insurance typically costs between £150 and £200 per year. If you get a mortgage from a bank in the UK, you may be able to include property insurance in your plan.

Building insurance is a legal requirement if you are purchasing a property to rent out. Home contents insurance is another option worth considering; compare your options on sites like Confused.com.

More information on the various types of insurance available can be found in our article on insurance in the UK.

Mortgage payments in the United Kingdom

The month after you purchase the property, you must begin making mortgage payments on your UK mortgage. The amount paid toward the mortgage loan and the amount of interest paid comprise your mortgage repayment. This is true unless you have an interest-only mortgage, in which case you will pay off the interest-only portion and then have to settle the mortgage amount at the end of the term.

You can usually renegotiate your UK mortgage with your lender at any time by switching to a different mortgage, remortgaging, renegotiating the payment period, or switching to a different lender. However, keep in mind that this may result in additional administrative fees.

Contact your lender if you are having difficulty making mortgage payments. Citizens Advice and the National Debtline also provide free debt advice. In Scotland and Wales, you may be eligible for assistance through a mortgage rescue scheme or a support fund.

Mortgage refinancing in the United Kingdom

The process of taking out a new mortgage to pay off your existing mortgage is known as refinancing. It is not the same as taking out a second mortgage to pay alongside your current mortgage.

You may wish to refinance your mortgage in order to shorten your payment period, lower your interest rate, or free up some equity for other investments. In the United Kingdom, you can usually refinance your mortgage by taking out a new loan with the same or a different lender.

You’ll need to calculate the fees you’ll pay, which will include many of the same fees as your current mortgage plus any early repayment penalties. It is best to consult with a financial expert first to discuss the benefits of refinancing your UK mortgage.