Step 3: Understanding mortgages


Even if you’ve taken out a mortgage before, it’s worth giving yourself a little refresher course on the fundamentals.

A mortgage is a loan that uses a property as security for the lender. Different lenders offer different rates and types of mortgage, but all mortgages have a few things in common:

  • You are charged interest on the money you borrow
  • The higher the mortgage rate, the more money you pay in interest
  • The quicker you pay off your mortgage, the less interest you pay

Most borrowers aim to repay their mortgage over 25 years, but it’s also possible to take out a mortgage for a shorter or longer period.

The deposit you need depends on the kind of mortgage you go for. Lenders typically look for a deposit of at least 10%. The bigger the amount you can pay upfront, the better the deal you’re likely to get.

Repaying your mortgage

A mortgage has two parts. The original amount borrowed to buy the property, sometimes known as the capital, and the additional amount the lender charges for lending you the capital, otherwise known as the interest.

When you take out a mortgage you choose how you would like to repay it. You can take out:

  • a repayment mortgage
  • an interest only mortgage
  • a combination of the two

Repayment mortgage


With a repayment mortgage (sometimes called ‘capital and interest’) your mortgage payment covers the interest and also helps to reduce the amount you owe (‘the capital’). As long as you keep up your payments, you can be sure your whole mortgage will be paid off at the end of the mortgage term.


Interest only mortgage


With an interest only mortgage your mortgage payment only covers the interest on what you owe. At the end of the mortgage you pay off the amount you’ve borrowed using savings or investments built up during the mortgage period.

If you take out an interest only mortgage you must be sure that you will have enough money to repay the mortgage at the end of the term.

Santander mortgages

The chart below shows the different types of mortgages we offer, and how they work. It’s a good idea to consider carefully the kind of mortgage that would be best for you. Ask yourself questions such as:

  • How predictable will your income be? Will it help you to know exactly what your monthly mortgage payments will be each month?
  • Or, would you be happy for your monthly payments to increase or decrease, depending on the Bank of England base rate?
  • Might you have some extra money at some point which will allow you to make overpayments on your mortgage and shorten the term?

Fixed rate mortgages

Tracker rate mortgages

Lifetime Tracker mortgages

Tracks the Bank of England base rate




Fixed monthly payments




Initial rate period

From two years

Two years

For the lifetime of the mortgage term

Interest rate reverts to our variable Follow-on Rate (FoR) after the initial rate period




Unlimited overpayments

Up to 10% of the balance per calendar year



Early repayment charge1




1If you choose to repay your fixed rate loan amount in full or overpay by more than 10% each calendar year, you'll need to pay an early repayment charge.

If your mortgage comes with the additional benefit of cashback, you will only need to repay this if you repay your mortgage within the first two years.

  • A fixed rate mortgage gives you the peace of mind that comes from knowing exactly what your payments will be each month during the 'fixed rate period', which is the amount of time you pay an introductory rate on your mortgage.
  • A tracker rate mortgage tracks above the rate of interest set by the Bank of England (the base rate). Your payments will increase or decrease in line with changes to this base rate.

Additional benefits

On the majority of our mortgages you'll benefit from a free standard valuation on a property valued up to £2.5 million.

Important Information


All applications are subject to status and our lending criteria. This means that the amount we’ll lend you will depend on your individual circumstances, the type of property and the amount you borrow. For example, we may require a bigger deposit if you’re buying a flat or new build property.