How do mortgages work?

Once you get a mortgage, you pay back the amount you have borrowed, plus interest, in monthly instalments over a set period, usually around 25 years, however you can take mortgages for longer or shorter periods of time.

The mortgage is secured against your property until you have paid it off in full. This means the lender could repossess your home if you fail to repay it.

In the UK, you can get a mortgage on your own or take out joint mortgage with one or more people.

What’s the difference between a loan and a mortgage?

A mortgage is a type of loan that’s secured against your property. 

A loan is a financial agreement between two parties. A lender or creditor loans money to the borrower and the borrower agrees to repay this amount, plus interest, in a series of monthly instalments over a set term.

There are several types of loans. Some are secured, such as a mortgage, but others are unsecured. This means you do not need to use an asset as collateral. However, the amounts borrowed with unsecured loans are usually smaller with higher interest rates.