What Is a Mortgage Illustration?

Keeping track of multiple properties, mortgage offers, finances, and expenses can be harrowing. Thankfully, there’s an easy way to do this in the UK in relation to understanding the details of your mortgage.

A mortgage illustration is a document that clearly outlines the necessary information for each mortgage offering.

In this article, we will take a quick look at mortgage illustrations and how they help the mortgage process.

Let’s begin.

What Is A Mortgage Illustration?

A mortgage illustration is similar to a transaction receipt, which includes all the information and costs for the mortgage you’ve applied for. Your broker or provider directly should go through this with you before any mortgage application is submitted. 

Every bit of required information about the mortgage deal is included in the mortgage illustration.

Mortgage illustrations provide a clear overview of the mortgage deal, allowing you to compare multiple offers and decide which is best for you. 

For both experienced and first-time buyers, the mortgage illustration is an essential document that helps you make better decisions.

What’s Included In The Mortgage Illustration?

The mortgage illustration document contains a detailed list of all payments and costs associated with the mortgage in question. It usually includes the following factors:

• Mortgage amount
• Monthly repayment amount
• Initial interest costs
• Total interest costs over the mortgage period
• Interest type (fixed or variable)
• Early repayment or overpayment costs
• The cooling-off period, during which you can withdraw from the deal
• Special features like cashback options
• Fees such as valuation, lender, solicitor and broker fees

Mortgage illustrations include all general information about the mortgage, but each illustration is also tailored to the application in question. Every illustration starts with an introductory section with the lender information.

Then comes the section that contains details about your mortgage advisor, such as contact details and any associated information. 

From this section, you’ll also know the procuration fees your broker will earn from the lender if the application is successful.

Next, you’ll find all the information regarding the mortgage itself, the sections that follow will detail each of the factors mentioned above. 

The final sections usually mention the terms and conditions of the mortgage, overpaying and underpaying conditions, etc.

How To Get A Mortgage Illustration

Your mortgage advisor can provide the mortgage illustration after you schedule an appointment with them. 

You’ll need to discuss your financial situation, income, expenses, and the mortgage amount you’re looking for. 

You might be asked to provide some of the following information:

• Annual income statement
• Deposit amount
• Mortgage duration
• Property appraisal value
• Mortgage amount being sought

They might also ask for ID proof for verification purposes. Once everything has been provided, the advisor will give you the illustration tailored to your needs after they have found a suitable lender for your circumstances.

It’s essential to remember that a mortgage illustration differs from a mortgage offer. The mortgage illustration is a non-binding document, while the offer requires credit checks and affordability assessments for issuance after a full application has been submitted.

Unlike the illustration provided initially, the offer document is provided in the later stages of the application.

Moreover, since mortgage illustrations are non-binding, you are not required to respond or agree to the terms and conditions. Similarly, receiving the illustration doesn’t guarantee receiving an offer.

Frequently Asked Questions (FAQs)

1. Is An ESIS The Same As A Mortgage Illustration?

A European Standardised Information Sheet (ESIS) is similar to a mortgage illustration in that both documents illustrate the risks and features involved in the mortgage deal.

2. Can The Details In A Mortgage Illustration Change?

Since the mortgage is not binding, its details can change based on changes in your financial situation or the lender’s requirements. We recommend carefully reviewing the final mortgage offer and agreement documents before signing the dotted line.

3. What Is The Validity Period For A Mortgage Illustration?

The validity of mortgage illustrations varies from lender to lender, from a few weeks to several months.

4. Are There Any Regulatory Requirements Governing Mortgage Illustrations In The UK?

The Financial Conduct Authority (FCA) governs and regulates mortgage illustrations in the UK. The FCA Mortgage Conduct of Business (MCOB) sourcebook lays down all the rules governing mortgage illustrations. 

5. Is it possible to request changes to the mortgage illustration?

Yes, in case of discrepancies or non-reflected requirements, you can request a change to the illustration from your broker or lender.

6. Do I Need To Pay To Get A Mortgage Illustration?

In the UK, mortgage brokers and lenders usually provide mortgage illustrations for free. Some brokers charge for their advisory services, but this charge is generally disclosed during the initial discussion.

7. What Happens If I Don’t Understand Something In The Mortgage Illustration?

If you find anything in the mortgage illustration unclear, it’s important to seek clarification from your broker or lender. They can help clear things up.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.