Mortgage Types Guide
Residential Mortgages
A residential mortgage is a type of loan used to purchase a property that will be used as the borrower’s primary residence. This type of mortgage is usually provided by a bank, building society, or other financial institution, and is secured against the property being purchased.
With a residential mortgage, the borrower usually makes a deposit towards the purchase price of the property, and then borrows the remaining amount from the lender. The borrower then makes monthly mortgage repayments to the lender, which typically include both the principal amount borrowed and the interest charged on the loan.
Residential mortgages are available in a range of different types, including fixed-rate mortgages, variable-rate mortgages, and tracker mortgages. The interest rate on a residential mortgage can be either fixed for a set period of time or can fluctuate over the term of the loan, depending on the type of mortgage and the lender’s policies.
In order to be eligible for a residential mortgage, borrowers must meet certain criteria, such as having a good credit history, being able to afford the mortgage repayments, and having sufficient income to support the loan. The amount that can be borrowed through a residential mortgage will also depend on a range of factors, including the borrower’s income, credit history, and the value of the property being purchased.
Overall, a residential mortgage is a common way for people to purchase a home, and can provide a reliable and affordable way to finance a property purchase over the long term.
BTL Mortgages
A buy-to-let mortgage is a type of mortgage that is specifically designed for people who want to buy a property with the intention of renting it out to tenants. Buy-to-let mortgages are not available to people who intend to live in the property themselves.
Unlike a residential mortgage, which is based on the borrower’s income and ability to make repayments, a buy-to-let mortgage is generally based on the expected rental income of the property. Lenders will typically require the rental income to be at least 125-145% of the mortgage payments (depending on your personal tax status) at a predetermined interest rate, depending on the product type selected, to ensure that the borrower can afford to make the repayments even if the property is unoccupied for a period of time.
Where there is a shortfall in the rental income required, some lenders will allow a borrower to ‘top slice’.
Top slicing is where a mortgage lender considers the borrower’s overall income and assets, rather than just the rental income generated by the property when assessing affordability for the mortgage. This means that if the rental income is not sufficient to meet the lender’s affordability criteria, the borrower may be able to use their personal income or other assets to “top up” the rental income and meet the lender’s requirements.
Top slicing is typically used for borrowers with a high net worth or significant income from other sources who are looking to invest in property but may not meet the strict rental income requirements of some lenders. However, it is important to note that not all lenders offer top slicing, and the specific terms and criteria may vary depending on the lender and the product being offered.
Buy-to-let mortgages can come with higher interest rates and fees than residential mortgages, as they are considered higher risk. However, they can also offer the potential for income and capital growth if the property increases in value over time.
It’s important to carefully consider the costs and risks associated with buy-to-let mortgages, including the costs of maintaining the property, finding tenants, and the possibility of void periods when the property is unoccupied. It’s also important to comply with all legal requirements for landlords, including obtaining the necessary licenses and complying with health and safety regulations.
Ltd Company BTL Mortgages
A limited company buy-to-let mortgage is a type of mortgage designed for landlords who own rental properties through a limited company structure rather than as an individual. In recent years, many landlords have started to use limited companies as a way to hold their buy-to-let properties, in part because of changes to tax rules that make it less beneficial for individuals to hold rental properties.
With a limited company buy-to-let mortgage, the lender provides funding to the limited company rather than to the individual landlord. The limited company is then responsible for managing the rental properties, including finding tenants and maintaining the properties.
Limited company buy-to-let mortgages can offer several benefits to landlords, including tax advantages and limited liability protection. However, they can also come with higher interest rates and fees than individual buy-to-let mortgages, as they are considered higher risk.
It’s important for landlords to carefully consider their options and seek advice from a qualified professional, such as a financial advisor or accountant, before deciding whether a limited company buy-to-let mortgage is right for them.
IT Contractor Mortgages
An IT contractor day rate mortgage is a type of mortgage that is specifically designed for IT contractors who are paid on a daily rate or hourly basis. With this type of mortgage, lenders can consider the daily rate of pay, rather than the usual self-employed income, when calculating the amount that can be borrowed. This is because IT contractors typically work on short-term contracts and their income can fluctuate greatly, making it difficult to assess their affordability using traditional methods.
To qualify for an IT contractor day rate mortgage, the contractor will typically need to have a track record of contract work and a history of consistent income. They will also need to provide evidence of their current contract and projected future earnings. The mortgage will usually be assessed based on the contractor’s average daily rate over the past 12 months, rather than their current rate, to take into account any fluctuations in income. However, lender shave different criteria and can consider newer entries to the industry.
IT contractor day rate mortgages are a niche product and are offered by specialist mortgage lenders who understand the unique needs of contractors. They can be a good option for IT contractors who may struggle to secure a traditional mortgage due to their income structure.
Second Charge Mortgages
A second charge mortgage, also known as a second mortgage, is a type of loan that allows homeowners to borrow money against the equity they have built up in their property. This type of mortgage is separate from the homeowner’s primary mortgage and allows them to borrow additional funds without having to remortgage their property.
A second charge mortgage is secured against the borrower’s property, meaning the lender has the right to repossess the property if the borrower defaults on their payments. Because of this added security, second charge mortgages may have lower interest rates than other types of unsecured loans.
Second charge mortgages are often used for home improvements, debt consolidation, or other large expenses. They can also be used for investment purposes, such as funding a buy-to-let property. It’s important to note that the borrower is responsible for making repayments on both their primary mortgage and the second charge mortgage.
Equity Release Mortgages
An equity release mortgage, also known as a lifetime mortgage, is a type of mortgage product available specifically designed for homeowners who are 55 years or older. It allows homeowners to release some of the equity in their property as a lump sum or regular income, without having to sell their home or make any monthly repayments.
The amount that can be released depends on the age of the homeowner, the value of the property, and the amount of equity they have in it. The loan, including the interest accrued, is repaid when the homeowner dies or moves into long-term care, and the property is sold. The lender will then take their share of the proceeds from the sale, with any remaining funds going to the homeowner or their estate.
Equity release mortgages can be a useful way for retirees to access some of the equity tied up in their property to supplement their income or fund their retirement, but it’s important to understand the costs involved and the impact it may have on inheritance for loved ones. Therefore, it is important to seek independent financial advice before considering an equity release mortgage.

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Thameside Mortgage Ltd are not regulated by The Royal Institution of Chartered Surveyors, we do not have any involvement in the provision of this type of service / activity. We are not qualified surveyors and the information provided on this website is for informational purposes only. The information provided is not intended to be a substitute for professional advice, inspection, or survey.
It is important to seek professional advice and to undertake a proper survey/inspection before making decisions or taking actions related to a property.
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