A mortgage illustration is supplied to you, as a prospective borrower, by your mortgage broker, and will cover in detail all the costs involved in the type of mortgage you intend to apply for.
It is part of the mortgage process and will include all the key details about the mortgage, providing you with a detailed overview of the mortgage product recommended.
This is essentially your dedicated mortgage advisor recommendation in terms of the right product to meet your requirements and preferences. A mortgage illustration will be prepared for all mortgages, both residential and buy-to-let.
Your mortgage broker will discuss the mortgage illustration in detail with you and the mortgage costs involved before your application is submitted to the recommended lender allowing you to agree to your mortgage arrangement before proceeding any further.
What information do I have to supply to get a mortgage illustration?
The mortgage illustration is produced before a credit check is carried out, so if a number of different mortgage illustrations are required for any reason, this will not impact on your credit rating.
You will typically need to provide your mortgage broker with the following information;
- Your personal and financial circumstances, including your annual household income,
- Your outgoings including any credit arrangements,
- The value of the property you are considering (if you have reached this stage),
- The deposit you will be putting down on the property, or the equity which you already hold,
- The amount you wish to borrow from the lender,
- The duration of the mortgage you wish to take out (the mortgage term),
- Whether it is a fixed rate or variable rate deal and the duration of the product (e.g. fixed term length),
- Your preference for a capital and interest repayment structure, pure interest only, or a mixture of the two
Here at Mortgage360, our team of friendly mortgage advisors will discuss all of these aspects in advance with you, looking carefully at your finances in terms of your income and expenditure and personal preferences.
Your bank statements and documents evidencing your financial situation will be required to confirm details in order to provide an accurate mortgage illustration outlining every relevant aspect of the potential mortgage deal.
What information is included in the mortgage illustration?
The subsequent illustration provided by your mortgage advisor will provide a comprehensive overview of the fees and payments and all the details associated with your mortgage recommendation. These will include;
- Total mortgage amount,
- Initial monthly repayments,
- Initial interest costs, including an interest rate rise and annual percentage rate,
- Details on the type of mortgage (fixed term and length or variable interest rate),
- Information on costs associated with overpayment and early repayment,
- The cool-off period,
- Lender fees and other costs (such as arrangement or valuation fees),
- Information on your lender and rights as a borrower (consumer protection),
- Any special features (such as cashback or a free valuation)
The document will not provide details such as legal fees connected to yourself, private valuation fees or other third-party costs you may have to pay, however, it will clearly detail anything you have to pay upfront to the lender or if you have chosen to add fees to your borrowing, where applicable.
Do I have to agree to this mortgage recommendation?
Absolutely not. If you are unsure about the mortgage illustration, discuss this with your dedicated mortgage advisor, here at Mortgage360. They will be able to find alternative solutions and options for other mortgages.
You are able to withdraw from the mortgage process at any point (prior to actual completion in the case of a remortgage, or exchange of contracts in the case of a new purchase) or together, we can look at your other mortgage options available from the mortgage market.
Does a mortgage illustration guarantee me a mortgage?
No, your mortgage illustration is not any sort of mortgage illustration guarantee, it just outlines a mortgage deal and the mortgage terms that you may be eligible for and that will match your requirements, but it is not a formal offer of a mortgage.
A formal mortgage offer will come from your mortgage lender once you have officially applied for and been accepted for the mortgage.
There are no guarantees even with a mortgage illustration and a mortgage agreement in principle. Your mortgage application may still be rejected for a range of reasons including your credit score, lack of evidence in terms of your income, assessed affordability or even issues with the property you wish to buy or remortgage.
Mortgage Illustration vs Mortgage Offer
Mortgage illustrations are not the same as a mortgage offer. A mortgage illustration is simply a document which details information on the prospective mortgage product in question and forms the basis of the recommendation. The mortgage offer ultimately contains exactly the same information, but it is the meaning of the document and the stage in the process at which they are both provided to you, which is the key difference.
To receive a mortgage offer, you will need to go through a formal application process to evidence your income, outgoings and deposit funds. Once you’re ready to proceed, your mortgage broker will submit your full mortgage application and upload supporting documents through the lender’s portal, which will then be assessed by the lender and undergo credit checks.
Only after this process is completed will you receive a formal mortgage offer document, therefore the mortgage offer comes at a later stage in the process, once the main details have been checked and verified.
Mortgage illustration vs Agreement in principle
Mortgage illustrations and an agreement in principle are also different. The mortgage illustration comes first, the agreement in principle follows next (it is at this stage that a credit check is usually performed) and if accepted at this stage, then your full application is ready to be submitted by your mortgage advisor to the lender at the right time. The lender will then assess your financial situation and ensure that you meet their affordability and lending criteria.
An agreement in principle does not constitute a mortgage offer.
Do I need a mortgage illustration?
No, not until final advice has been given to you, but your mortgage illustration outlines clear information on the financial implications of the step you are planning to take, and what is included in a mortgage and this may help you to compare different mortgages accurately and decide which best matches your needs.
“A mortgage illustration document is a valuable piece of information giving you full details of the mortgage product your broker is recommending specifically tailored to match your personal and financial situation, covering everything from monthly repayments through to early repayment charges and overall cost,” explains Mortgage360’s Matt Illingworth. “Although it is not a guarantee of a mortgage in the future, it provides clear and comprehensive information to assist with the decision-making process”.Matt Illingworth, Mortgage Broker
What happens after a mortgage illustration?
Once you and your mortgage broker have had an opportunity to review your mortgage illustration together, consider the document carefully and agree to proceed further with the mortgage, your dedicated mortgage advisor will submit your formal mortgage application based on the illustration. They will then send all of the necessary documents to your lender so that your mortgage application can be assessed by the lender’s underwriting team, where affordability checks will be performed.
How long it will take to receive a formal offer document is dependent upon how straightforward your application is. This can range from a matter of days to several weeks if additional paperwork and evidence are required. There will also be a valuation assessment of the subject property before a formal offer is confirmed.
Once you are in receipt of your formal mortgage offer, this is typically valid for up to six months and can sometimes be extended if needed. Once you reach this stage in the process, your transaction will then pass over to your solicitors to proceed further and they will have already advised you about their legal fees and if any stamp duty is applicable, or not.
A mortgage illustration occasionally referred to as a European Standardised Information Sheet (ESIS), or Key Facts Illustration (KFI) is not a mortgage offer. It is intended to provide a detailed overview of the product in question, giving you an insight into the overall cost and interest rate, before you choose to proceed any further.
It will give you a clear picture of the total cost and fees involved in securing a mortgage offer, including the interest.
Talk to our team of friendly mortgage advisors at Mortgage360 today, our advisors understand every aspect of the journey and will look at your individual personal and financial situation to determine how much you can borrow, select the right product for you, provide you with your mortgage illustration and support you through the entire application process. We will ensure you understand the implications in full and answer any questions you may have throughout the process.
Mortgage360, is here for all your property needs.
The information contained within this article was correct at the time of publication but is subject to change.
Your home may be repossessed if you do not keep up repayments on your mortgage.