Standard Mortgage: A Comprehensive Beginner’s Guide

standard mortgage loan

Owning a home is an exciting milestone in life. However, saving enough and actualizing this dream may take several years. And even then, you may still need some financial assistance to turn this dream into a reality.

This is where a standard mortgage comes in handy. With a standard mortgage, you can purchase your dream home and make payments over time, making it more affordable and attainable.

But with so many options and terms to understand, it can be overwhelming for a beginner. In this comprehensive beginner’s guide to standard mortgages, we’ll simplify the following;

  • The basics of a standard mortgage
  • How standard mortgages work
  • The different types of standard mortgages available
  • How to get a standard mortgage

What Is a Standard Mortgage?

A standard mortgage is a loan used to purchase a home or other real estate property. When you want to buy a home but cannot afford to pay the full price upfront, you may choose to take out a mortgage to finance the purchase.

The lender, usually a bank or other financial institution, will provide you with the finances to pay for the property. You’ll be required to make regular payments over an agreed period (usually 15 or 30 years) until the loan is fully paid off. The property will belong to the lender until the payment is cleared.

What is standard variable rate mortgage?

A standard variable rate mortgage (SVR) is a type of loan in which the interest charged varies according to prevailing rates. It is also known as a ‘floating rate’ or ‘adjustable rate’. The lender will adjust your monthly payments accordingly, depending on any changes in the base interest rate set by the Bank of England. With an SVR, you will benefit from a lower rate if the base rate drops but you should also be aware that your payments could increase if the base rate rises. Therefore, it is important to understand the risk associated with this type of loan before committing to one. You may want to consider taking out an interest-only or fixed-rate mortgage if you are concerned about the potential for rising payments.

Ultimately, a standard variable-rate mortgage can be a good choice if you want more flexibility than a fixed-rate mortgage and are comfortable with the risk of potentially higher payments in the future. However, it is important to consider your own situation before making any decisions. Talk to a loan officer or financial advisor to ensure you make the right choice for your individual needs.

With any type of mortgage, it’s important to shop around and compare different lenders and their products before making a decision. Make sure you understand all the fees involved in the process and get quotes from multiple lenders in order to find the best rate and terms for your individual situation.


How Does a Standard Mortgage Work?

After finding your dream home, you’ll be first required to pay a down payment. This is an amount that you pay upfront, mostly around 3% to 20% of the total cost of the property.

The percentage may vary depending on the lender, the type of mortgage, and your creditworthiness.

A larger down payment means you will be borrowing less money from the lender, which can result in lower monthly mortgage payments and potentially a lower interest rate on your mortgage.

The table below illustrates how different down payment percentages have an effect on the amount you’ll need to borrow for your mortgage.

Cost of Home
Down Payment%
Down Payment Amount
Mortgage You’ll Borrow

In addition to lower monthly payments and potentially a lower interest rate, a larger down payment can also improve your chances of being approved for a mortgage. Lenders prefer borrowers with a larger down payment because it shows they are financially responsible and less likely to default on their loans.

Once granted the mortgage loan, you’ll be required to make monthly payments over an agreed period. These payments include the principal, the amount borrowed, and the interest, which is the money’s cost.

In addition to the down payment and closing costs, you’ll need to factor other expenses into your budget. Some of the costs include; homeowners insurance, property taxes, and maintenance expenses.

Fortunately, most financial institutions handle this on your behalf by setting up an escrow account—an account set up by the lender that holds funds that cover all expenses related to the home on your behalf.

Lastly, since mortgages are secured loans, the lender can seize your property if you default on your payments. This is known as foreclosure and can significantly affect your credit score.

If you struggle to make your mortgage payments, ensuring you contact your lender as soon as possible is crucial. Request them to modify your loan or set up a repayment plan that allows you to catch up on your payments.

What Are the Different Types of Standard Mortgages?

There are several types of mortgages in banking and financial institutions. However, not every mortgage is created equal.

Below is a summary of the most common types of mortgage loans available with their pros and cons.

1. Fixed-Rate Mortgages

As the name suggest, fixed-rate mortgages are mortgage loans where the interest rate remains the same throughout the life of the loan. This means your monthly mortgage payments will remain the same, making it easier to budget for your housing costs over time.

Fixed-rate mortgages typically come in two primary terms: 15-year and 30-year mortgages. The 15-year mortgage is a shorter-term loan that allows you to pay off your mortgage more quickly and build home equity faster.

On the other hand, the 30-year fixed-rate mortgage offers lower monthly payments than a 15-year mortgage, but it also has a higher interest rate. This means you’ll pay more interest over time, but it can make your monthly payments more affordable.



With a fixed-rate mortgage, you don’t have to worry about fluctuations in interest rates, making it easier to plan for your financial future. This type of mortgage is also ideal for risk-averse borrowers who prefer predictability.

Simple to Understand

Another advantage of fixed-rate mortgages is that they are relatively simple and easy to understand. You know exactly what your payments will be for the life of the loan, making it easier to budget and plan for other expenses.


Higher Interest

Fixed-rate mortgages often have higher interest rates than other types of mortgages. This means you’ll have spent more money at the end of your loan term.

No Flexibility

Fixed mortgages are rigid and do not allow changes. For instance, if interest rates drop significantly after you’ve taken out a fixed-rate mortgage, you may miss out on the opportunity to refinance at a lower rate.

2. Adjustable-Rate Mortgages (ARMs)

Adjustable-rate mortgages (ARMs) are a type of mortgage where the interest rate changes periodically over the life of the loan. The interest rate is usually fixed for an initial period, typically between 5 and 10 years.

The loans are then adjusted annually based on an index such as the Prime or LIBOR rates. This means that your monthly mortgage payments can go up or down over time, depending on changes in interest rates.


Excellent Option for Potential Homeowners Starting Careers

One of the main advantages of an ARM is that it can be a good option for borrowers who expect their income to increase over time.

For example, if you’re a recent graduate just starting your career, you may expect your income to increase significantly over the next few years. An ARM can help you take advantage of lower interest rates early in your career and adjust to higher rates as your income grows.

Higher Loan Amount

Another advantage of an ARM is that it can help borrowers qualify for a larger loan amount. Because the initial interest rate on an ARM is lower than a fixed-rate mortgage, you may be able to afford a more expensive home.


Higher Interest Rates

If interest rates increase significantly, your monthly mortgage payment could become unaffordable. However, most ARMs have caps limiting how much the interest rate can increase in any period to mitigate this risk. Therefore, it’s crucial to understand these caps and to budget accordingly.

Complex to Understand

Another disadvantage of ARMs is that they can be complex and challenging to understand. It’s essential to work with a knowledgeable lender who can help you understand the terms of your ARM and how your interest rate will be calculated over time.

3. Government-Insured Mortgage

Government-insured mortgages are home loans from the federal government. The FHA (Federal Housing Administration) loan is the most common government-insured mortgage.

FHA loans are designed for first-time homebuyers and low- to moderate-income borrowers. These loans are insured by the FHA, meaning lenders are more willing to offer them to borrowers who may not qualify for traditional loans due to lower credit scores or smaller down payments.

FHA loans require a minimum down payment of 3.5% and have more flexible credit requirements than conventional loans.


Lower Down Payment

Government-insured mortgages often have lower down payment requirements than traditional mortgages. For example, FHA loans require a minimum down payment of 3.5%. This makes it easier for borrowers to purchase a home, especially if they don’t have significant savings for a down payment.

Lenient Credit Requirements

Government-insured mortgages also have more lenient credit requirements than traditional mortgages. For example, FHA loans have a minimum credit score requirement of 580, while VA loans and USDA loans do not have a minimum credit score requirement. This can make it easier for borrowers with less-than-perfect credit to qualify for a mortgage and own a home.


Require Additional Fees

Government-insured mortgages may require additional fees, such as mortgage insurance premiums and a funding fee that is rolled into the loan amount. These additional amounts can add to the overall cost of the mortgage, making the mortgage costly.


How Can I Get a Standard Mortgage?

Below is a step-by-step guide on getting a standard mortgage;

  1. Check your credit score: Your credit score plays a big role in whether you can get approved for a mortgage and what interest rate you will be offered. You can check your credit score for free online by visiting
  2. Determine your budget: Before you start house hunting, you’ll want to determine how much you can afford to spend on a home. This will help you determine what size mortgage you can qualify for.
  3. Get pre-approved: Getting pre-approved for a mortgage can help you determine your budget and make you a more attractive buyer to sellers.
  4. Shop for a home: Once you know your budget, you can start shopping for a home that meets your needs and falls within your price range.
  5. Apply for a mortgage: When you find a home you want to buy, you’ll need to apply for a mortgage. You’ll need to provide the lender with financial documents, such as tax returns and pay stubs.
  6. Close on the mortgage: After your mortgage application is approved, you’ll need to close on the mortgage. This involves signing a lot of paperwork and paying closing costs.
  7. Make mortgage payments: Once your mortgage is closed, you’ll start making regular mortgage payments according to the terms of your loan agreement.



Overall, acquiring your dream home through a standard mortgage requires careful planning and execution.

It’s also essential to have a good credit score, a reliable income, and sufficient funds for the down payment and closing costs, regardless of the mortgage type you select. By following the guidelines in this guide, you can make informed decisions and take the necessary steps to achieve your goal of owning a home.


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This guide provides essential information on the process of acquiring a mortgage, including understanding loan types, evaluating credit scores, budgeting for down payments and closing costs, and making regular payments. With this knowledge in hand, you can confidently make informed decisions and take steps toward owning your dream home.


Keywords: mortgage, loan types, credit score, down payment, closing costs, payments.


Search description: Learn all about the process of acquiring a mortgage and how to make informed decisions with this comprehensive guide. Get information on loan types, credit scores, budgeting for down payments and closing costs, and more to achieve your goal of owning a home.





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