A residential mortgage is a substantial, long-term loan secured by one or more individuals to acquire a home for personal, residential purposes—typically to reside in. The property must be used as a residence by the client taking out the mortgage. This means that they won’t be able to buy the property to rent out to tenants or use it for commercial purposes. Securing a residential mortgage typically requires a borrower to provide a deposit which is typically 10% of the value of the property on which the borrower plans to secure the mortgage.

 Any property under a current residential mortgage must serve as the permanent residence of at least one of the borrowers and cannot be rented out to tenants or used for commercial activities. Generally, residential mortgages span an extended period, with 30 years being the current average in the UK. These loans are repaid in monthly instalments, which include both principal and interest until the property is entirely owned by the borrower. To mitigate some of the risk for the lender, a deposit is typically required due to the high loan amount, which often exceeds at least four times the borrower’s income.