A Simple Guide for Property Beginners
If you’re stepping into the world of property in the UK, chances are you’ll come across two common terms: mortgage and remortgage. These words might sound intimidating, but understanding them is easier than you think. In this article, we’ll break it down into plain English and explain why these concepts are essential for anyone buying property—or planning their next financial move.
What Is a Mortgage?
A mortgage is simply a loan you take out to buy a property. Since most people don’t have the full cash to purchase a home outright, banks and lenders step in to provide the money you need. You then repay this loan over an agreed period—usually 25 to 35 years—with interest.
Think of it as a partnership: the lender helps you buy the property, and in return, you agree to pay them back in monthly instalments. If you don’t keep up with payments, the lender has the right to take the property back—this is called repossession.
How Does a Mortgage Work?
- Deposit: You pay an upfront amount (usually 5–25% of the property price). The rest is covered by the mortgage.
- Loan Term: The length of time you agree to repay the loan (e.g., 25 years).
- Interest Rate: This is what the lender charges you for borrowing their money. It can be fixed (stays the same for a set period) or variable (changes based on the market).
- Monthly Payments: These cover part of the loan (capital) and the interest.
Popular Mortgage Jargon Explained
- Fixed-Rate Mortgage: Your interest rate stays the same for a set period (e.g., 2, 3, or 5 years).
- Tracker Mortgage: Your rate follows the Bank of England base rate (it goes up or down).
- Standard Variable Rate (SVR): The lender’s default rate you move to when your initial deal ends—often higher than your fixed or tracker deal.
- Loan-to-Value (LTV): The percentage of the property price you borrow compared to what you pay as a deposit. For example, if you buy a house for £200,000 and put down £20,000, your LTV is 90%.
- Equity: The part of the property you own outright. Over time, as you pay down the mortgage or as the property value goes up, your equity increases.
What Is a Remortgage?
A remortgage means switching your existing mortgage to a new deal, either with the same lender or a different one. It’s like changing your phone contract to get a better tariff or more benefits—but with much bigger numbers involved.
Why do people remortgage? There are several common reasons:
✅ 1. Your Current Deal Is Ending
Most mortgages start with an introductory fixed or discounted rate for 2, 3, or 5 years. When this period ends, you usually move to the lender’s SVR, which is almost always higher. Remortgaging at this point can save you thousands by locking in a better rate.
✅ 2. Interest Rates in the Market Have Dropped
If rates are significantly lower than when you first took out your mortgage, switching could mean smaller monthly payments.
✅ 3. To Consolidate Debt
If you have high-interest debts—like credit cards or personal loans—you can roll them into your mortgage. This often makes payments more manageable, but be cautious: stretching short-term debts over decades can cost more in the long run.
✅ 4. To Release Equity (Raise Money)
If your property has gone up in value, you can remortgage for a higher amount and use the extra cash for things like:
- Home improvements
- Investing in another property
- Funding major expenses (e.g., education, starting a business)
The Risks and Things to Consider
- Fees: Remortgaging may involve arrangement fees, valuation fees, and legal costs.
- Early Repayment Charges: If you leave your current deal before it ends, you might pay a penalty.
- Long-Term Cost: Extending your mortgage term can lower monthly payments but increase the total interest paid.
The Bottom Line
A mortgage is your gateway to home ownership, and a remortgage is a powerful tool to save money or unlock funds for other goals. Understanding the jargon and the timing can make a huge difference in your financial journey.
Thinking About Remortgaging or Buying a Property?
Speak to a qualified mortgage adviser who can guide you through the best options for your situation. At Empreso, we help you:
✔ Find the right mortgage
✔ Compare deals across lenders
✔ Save money and avoid pitfalls
📞 Book your free clarity session today
👉 Click here to schedule your call
Author: Alain Mbe
Alain Mbe is the founder of Empreso, a purpose-led network helping individuals create, protect, and transfer wealth through property, finance, and legacy planning. With over two decades of experience in property investment and a background as a qualified mortgage adviser, Alain is passionate about empowering people to achieve prosperity with intention. He writes about property strategies, financial planning, and personal transformation—offering practical insights and actionable steps to thrive in today’s evolving economy.