What is a mortgage?
A loan secured against your property. If you stop making payments, the lender can repossess your home. Every mortgage has two components:
- Capital — the amount you originally borrowed
- Interest — the lender's charge for lending you the money
How these two components are handled each month determines what type of mortgage you have.
Repayment vs interest-only
Repayment mortgage: each monthly payment covers the interest due plus a portion of the capital. Early payments are mostly interest; later payments are mostly capital. By the end of the term — typically 25–30 years — you own the property outright. This is the most common type for homeowners.
Interest-only mortgage: your monthly payment covers only the interest. The capital stays the same throughout. At the end of the term you must repay the full original loan in one lump sum. Used mainly by buy-to-let landlords and significantly harder to get as a residential mortgage now.
"With a repayment mortgage, every payment is quietly building your equity — your real ownership stake in the property."
Fixed rate vs tracker
Fixed rate: your interest rate is locked for an initial period — usually 2, 3 or 5 years. Your monthly payment doesn't change, which makes budgeting straightforward. At the end of the fixed period you're moved to the lender's Standard Variable Rate (SVR), which is almost always higher — so most people remortgage before this happens.
Tracker: your rate follows the Bank of England base rate plus a set margin (e.g. base rate + 1%). Payments rise and fall with the base rate. Can be cheaper when rates are low, but you take the risk of increases.
SVR: the lender's default rate once any introductory deal ends. Usually the most expensive option and best avoided.
Loan-to-value (LTV) — the number that matters most
LTV is the percentage of the property value you're borrowing. A 10% deposit on a £300,000 home means borrowing £270,000 — a 90% LTV. The lower your LTV, the less risk for the lender, and the better the rate you'll be offered.
- 95% LTV — available, but rates are significantly higher
- 90% LTV — much wider product choice
- 75% LTV or below — access to the most competitive deals
As you repay and property values rise, your LTV falls — unlocking better deals when you remortgage.
How to get the best deal
- Use a whole-of-market broker — they search dozens of lenders and are often fee-free (paid by the lender instead)
- Remortgage before your fixed rate ends — you can start the process 3–6 months early and lock in a new rate without moving
- Consider overpaying — most mortgages allow you to overpay up to 10% of the outstanding balance per year without penalty, significantly reducing the total interest paid and shortening your term
- Check your credit file before applying — errors on your report can lead to rejection or a higher rate
In Trove Wealth
Add your mortgage as a liability account to track the outstanding balance. As you make payments each month, your net worth automatically reflects the growing equity in your home — one of the most motivating numbers to watch over time.