If you’re thinking about buying a house, the first question on most minds is – how do I get a loan? The good news is there’s a loan for almost every situation, and you don’t need a finance degree to understand it. Below we break down the main loan types, what lenders look at, and quick tricks to stretch your borrowing power.
In the UK you’ll mostly run into three categories: fixed‑rate mortgages, variable (or tracker) mortgages, and government‑backed schemes like the FHA‑style Help to Buy. Fixed‑rate deals lock your interest for 2‑5 years, so your repayments stay the same even if the Bank of England moves. Variable mortgages follow the market – they can go down and up, which can be a win if rates drop but a headache if they climb.
Projects aimed at first‑timers, such as shared ownership or part‑buy‑part‑rent, also count as home loans. These let you buy a slice of the property (often 25‑75%) and rent the rest, lowering the amount you need to borrow. The trade‑off is you’ll pay rent on the remaining share and may face stair‑casing costs if you decide to buy more later.
Don’t overlook specialised loans like the “FHA” style help for low‑deposit buyers or the NZ‑style mortgage borrowing guide that shows how income limits affect your maximum loan. These options can shave years off your saving plan.
lenders start with a simple formula: your income, existing debts, and credit score. To boost the first two, pay down any credit‑card balances before you apply – even a small reduction can raise the loan amount you qualify for. If you earn irregular income (freelance or commission), keep detailed records of the last 12 months; many lenders will take an average to calculate what you can afford.
Credit scores matter more than you think. Aiming for a score above 720 will usually land you a lower interest rate, which translates into a higher borrowing limit. Check your credit report for errors and dispute any wrong entries. A clean report can shave 0.3‑0.5% off your rate – that’s thousands over the life of the loan.
Another tip: increase your deposit. Even an extra 5% can push you from a high‑risk to a standard‑rate bracket, unlocking better deals. If you have savings in an ISA, consider moving a portion into a cash‑saving account that you can pull out for the deposit; just make sure the funds are “seasoned” for at least three months to satisfy lender checks.
Finally, shop around. Websites that aggregate mortgage offers let you compare thousands of deals in minutes. Don’t rely on the first quote your bank gives – you might find a better fixed‑rate deal with a regional building society or a lender that offers a discount for first‑time buyers.
Remember, the best home loan is the one that fits your budget, not the one with the lowest headline rate that pushes you into unaffordable repayments. Use these tips, run the numbers, and you’ll walk into the property market with confidence.
