Getting started

Understanding mortgages

What's in this section?

What is a mortgage?

A general overview about what mortgages are.

Types of mortgage

Find out about the types of mortgage we offer.

Mortgage payment options

The different options for paying back your mortgage.

What is a mortgage?

Very few first time buyers have enough cash to buy a home outright. Most rely on a mortgage, which is money you borrow to buy a property. 


Mortgage basics:

  • A mortgage is money borrowed from a lender in the form of a loan, which is usually repaid over an agreed period of time.
  • The amount we lend to you will be based on your income and outgoings, as well as your ability to pay back the amount you've asked to borrow.
  • You’ll need to contribute some of your own money towards the property price, and this known as a deposit. Usually a deposit is at least 5% of the total cost of the property.
  • The mortgage is secured on the property you’re purchasing. This means your home may be repossessed if you do not keep up payments on your mortgage.

When you're looking for a mortgage, you'll need to consider:

  • How much you need to borrow
  • How much deposit you have
  • What you can afford to repay each month
  • When you'd like to pay it off by (mortgage term)

When you’re buying your first home, finding the right mortgage is one of the most important decisions you’ll make. At Nationwide we offer two types of mortgages - fixed rate and tracker rate mortgages. At the most basic level, fixed rate mortgages work with a fixed interest rate, while the interest rates on our tracker rate mortgages follow the Bank of England base interest rate. Here's more on the difference between the two types:


Fixed rate and tracker rate mortgages explained

Fixed or tracker rate - the difference
  Fixed rate mortgages  Tracker rate mortgages 
 At a glance Your interest rate is fixed, so your monthly mortgage payments are also fixed.    Your monthly mortgage payments will go up and down with the Bank of England base interest rate.
 Details Your interest stays the same for an agreed period, and you pay exactly the same per month until the end of the period. If the Bank of England base rate increases or decreases, you'll still pay the same fixed rate for the deal period.  Your interest rate is set at a certain percentage above the Bank of England base rate, and it follows the base rate if it increases or decreases. This means your monthly mortgage payments could vary.  There's a limit though to how low your interest rate will go - if the Bank of England base rate is lowered to 0.00% or less during the tracker period, you'll pay the 0.00% plus the agreed set percentage above the base rate.
 Overpayments  possible? Yes, up to your overpayment allowance with no penalty. More about overpayments Yes, up to your overpayment allowance on some, unlimited on others. More about overpayments
 Changing  your deal Changing your mortgage before the end of your fixed term will incur an Early Repayment Charge. Switch to one of our fixed rate mortgages at any point during your deal with no Early Repayment Charge.
 When your  deal ends Your rate reverts to Base Mortgage Rate or Standard Mortgage Rate depending on when the deal was secured. Your rate reverts to Base Mortgage Rate or Standard Mortgage Rate depending on when the deal was secured.

Payment options

The only type of mortgages we currently offer are capital repayment mortgages. This means part of your regular monthly payment goes into paying back the lump sum you borrowed, while the rest covers the cost of interest. As long as you keep up your monthly mortgage payments, your mortgage will be paid off in full by the end of your mortgage term.

How mortgage payments work:

  • Not only do you pay off your mortgage over a set period of time, you also pay interest on the money you owe, which forms part of your monthly payments.
  • The higher the mortgage rate, the more you’ll pay in interest.
  • The faster you pay off your mortgage, the less interest you’ll pay.
  • If you want to pay more than your monthly mortgage amount, this is called making an overpayment. Your mortgage will come with an overpayment allowance. If you go over your overpayment allowance, you may need to pay a fee. Find out more about overpayments.
  • If you pay off your mortgage before your term ends, you might need to pay an Early Repayment Charge.

Other lenders may offer interest-only mortgages and part and part mortgages, which are a combination of interest-only and capital repayment. We no longer offer either of these payment types.

YOUR MORTGAGE IS SECURED ON YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.

How much can I borrow?

Getting a Decision in Principle

Finding a property and making an offer

Applying for a mortgage

Completion and moving in