Moving home and applying for a mortgage can be stressful. That’s why it helps to know what you’re dealing with from the get-go. Here, we take a look at the UK’s largest mortgage provider and detail Lloyds’ range of mortgage products and rates.
Lloyds forms part of the Lloyds Banking Group, including Halifax, Scottish Widows, and Bank of Scotland. You can apply for a mortgage through any of them, although we’ll be looking at Lloyds Bank specifically in this guide.
Commanding over 17% of the UK’s mortgage market, Lloyds Banking Group is by far the biggest mortgage lender. Lloyds started out as a bank in 1765 but now extends its product offering to include various mortgages.
Whether you’re getting ready to buy your very first home or you’re moving for the third, fourth, or fifth time, Lloyds has a vast range of mortgage products available.
Regardless of which one you go for, you’ll typically receive a free standard valuation on your property. In some cases, Lloyds will also pay any basic legal fees using their eConveyancing service.
Types of Lloyds mortgages you can apply for include:
Suppose you’re already a homeowner and want to expand your property portfolio. In that case, a Lloyds buy-to-let mortgage might be a suitable option.
This type of mortgage is specifically for properties that will be rented out. With Lloyds, you’ll need to pass the following criteria to apply for a buy-to-let mortgage.
Age 25 or over when your mortgage term starts and under 80 when it ends
Already own a property in the UK
Be able to provide at least a 25% deposit
Not a first-time buyer
Be able to prove that the rental income of the property is more than your monthly mortgage repayments
If you’re buying multiple properties to let them out, note that you’ll only be able to hold up to five buy-to-let mortgages with Lloyds. The value of them combined cannot exceed £3m, either.
Suppose you’re not happy with your current mortgage terms or want a mortgage with more flexibility. In that case, it might be possible to remortgage your property. It could also be a good idea if you suspect the value of your property has changed.
Lloyds offers remortgages that allow you to end your current mortgage and switch to one of their deals instead. Lloyds will pay for a new valuation of your home and any legal fees as part of their remortgage service. Note that there may still be a product fee to pay.
If you’re a first-time buyer, you might benefit from this type of Lloyds mortgage. They’re designed to help people get on the property ladder and work by allowing a family member to pay for 10% of your property.
You (the buyer) will be able to borrow between 95% and 100% of your property’s total value. Your family member will then provide a 10% deposit which will go into a fixed savings account for 3 years. During this time, you’ll pay a fixed rate of 3.25% interest on your mortgage.
As long as you make your payments every month, your family member will get the 10% (plus any interest) back at the end of the 3 years. There are a few terms and conditions, including the fact you won’t be able to buy a property worth over £500,000. What’s more, the family member providing the deposit will need to be a Club Lloyds Current Account holder.
As with any mortgage lender, how much you’ll be able to borrow from Lloyds will depend on a range of factors. This includes:
Your annual income
Your credit history
Your average expenses
Any debt you have
Depending on your circumstances and finances, Lloyds could loan you up to 5 times your annual income. Buying a house with someone else? This figure will be based on your combined yearly income.
You’ll also need to think about your loan-to-value (LTV) ratio. Put simply, this is how much you want to borrow towards a property shown as a percentage. For example, if you have an 80% LTV mortgage on a £200,000 home, you’ll borrow £160,000 and provide the remaining £40,000 yourself.
Lloyds currently offer a range of LTV options, and they’ll differ depending on which kind of mortgage you apply for. In the current climate, they have very few mortgages above 85% LTV. This means the minimum you’ll need for a deposit is 15% of the property’s value.
Another thing you’ll want to consider when applying for a mortgage is your rate. This refers to the interest you’ll end up paying on top of your standard monthly mortgage repayments.
There are a few different options to consider when choosing a Lloyds mortgage rate:
Fixed-rate mortgages are the most popular pick and brilliant if you like to keep your finances consistent. You’ll get a fixed interest rate that will remain the same every month for your mortgage term duration (usually between 1 and 5 years).
Having consistent payment amounts every month allows you to budget better and see exactly how much you’ll end up paying in the future. Once the period of your Lloyds fixed-rate mortgage ends, you’ll usually be placed on a variable-rate until you change to a new product.
A variable-rate mortgage is what most mortgage lenders will put you on once the terms of your fixed-rate mortgage end. It will be selected by the lender and could go up or down with this kind of rate.
Variable rates ultimately mean your interest payments can be different every month. This is great if the rate drops, but it could also lead to more interest than a fixed-rate mortgage if the variable rate is higher.
Tracker rate mortgages are similar to variable-rate mortgages in that their interest rate can go up or down. The difference is that a tracker rate mortgage is linked to the Bank of England Base Rate.
This is the rate set out by the Bank of England’s Monetary Policy Committee and is subject to change whenever they review it.
The rate you’ll be offered with Lloyds will be unique to you and usually depend on your financial situation, deposit size, and length of your term. Other possible mortgage rates with Lloyds include offset mortgages (mortgage rates linked to your savings) and capped mortgages (which have an upper limit).
It may also be possible to get an interest-only mortgage. This is when you only pay monthly interest payments on your property and then pay off the loan in one lump sum at the end of your loan period.
If you’ve decided to sell your existing property and buy a new one, you may want to keep hold of your old mortgage. This is entirely possible with Lloyds and is a good idea if you’re happy with your current mortgage deal.
The technical term for this is ‘porting your mortgage’. It allows you to keep your existing mortgage rate and saves you the hassle of applying for a whole new mortgage. Not every Lloyds mortgage can be ported, so it’s worth looking at your paperwork to see if this is an option for you.
Unfortunately, it might be necessary to pause your mortgage payments if you’re going through a period of financial difficulty. This is known as taking a mortgage holiday and is something Lloyds offers to most mortgage clients.
The maximum mortgage holiday period you can usually take is 6 months. With Lloyds, you’ll need to speak to an advisor to see how long you’ll be able to pause your mortgage payments. Remember, while you won’t be paying off your mortgage during your mortgage holiday, interest will still be applied, so you may have more to pay off overall.
Have a little extra cash? You may be keen to pay off your mortgage quicker by overpaying your monthly agreements. This is possible with most Lloyds mortgages; however, you may incur fees or caps depending on your rate.
Fixed-rate mortgages tend to only let you overpay up to 10% of your total loan value each year. If you go over this, you may need to pay an Early Repayment Charge. Suppose you’re applying for or already have a Lloyds mortgage. In that case, you’ll be able to see details about overpayments on your documents.
Used our mortgage calculator and decided Lloyds have the best deals for you? You’ll be able to begin your mortgage application on their website, over the phone, or in-person with a Lloyds mortgage advisor. To apply for a Lloyds mortgage, you’ll need to pass the following criteria first:
Be over 18 – or over 21 if you’re applying for a buy-to-let mortgage
Have a minimum deposit of 15% – this could be more or less depending on the mortgage you’re applying for and the economic circumstances
Have proof of employment
Have a good credit score
When applying for a mortgage with Lloyds, they’ll carry out what they call an affordability assessment. This looks at things like:
Any debts or bad credit you might have – which can impact your chances of getting a mortgage offer
There’s a range of documents you’ll need to supply to complete your mortgage application. These will be set out by Lloyds, and you’ll either provide them yourself or through your solicitor. Typical paperwork needed includes proof of identity, proof of address, proof of income, and an agreement in principle.
Before you begin the mortgage application with Lloyds (or, indeed, any lender), you’ll need to secure something called an agreement in principle (AIP).
Often called a mortgage in principle or decision in principle, it’s a certificate stating the maximum amount a bank or lender would be willing to loan you for a mortgage. The figure is based on various evidence, from your income and expenses to a soft credit check (don’t worry, a Lloyds AIP won’t affect your credit score).
As well as providing proof for a lender that you should be able to pay back what you borrow, an AIP can be handy to have when you’re looking at properties. Presenting one to estate agents or sellers shows you’re serious about buying and less likely to waste their time.
Once you’ve submitted your mortgage application, you should expect to receive an offer within 2 weeks. This is standard for the industry, although it might be more or less depending on:
If you submitted all the necessary paperwork – being asked for extra evidence can slow things down
How busy the housing market is – if there’s a lot of buying and selling going on, applications can take longer to be approved than usual
During this time, Lloyds will assess your application and invite you for a mortgage interview (either in person or over the phone). They’ll also perform a valuation and complete any underwriting.
Once you’ve had an offer, it can take several months to complete any surveys and conveyancing. Your Lloyds mortgage offer will be valid for 6 months, giving you plenty of time for this to be done.
As well as being part of the biggest mortgage lending group in Britain, Lloyds also scored well in Which? Guide’s 2020 review. Out of 23 UK mortgage providers, they rated 13th and scored highly for their application process, transparency, and query handling.
If you’re not sure which Lloyds mortgage deal is best for you, you can compare mortgages using our handy tool. Why not check out our mortgage guides for more helpful guides and reviews of other top UK lenders?