A Mortgage Illustration is a personalised document that a mortgage broker will provide to you before you complete a mortgage application form with a specific lender. This document is also known as a Key Facts Illustration (KFI), or occasionally a ‘mortgage quote’.
The KFI will be in a similar format whether you receive one from a lender or from your mortgage broker. It is a requirement of the Financial Conduct Authority (FCA) that all clients are provided with one before they apply for a mortgage.
Why would you need a mortgage illustration?
The KFI is designed to be a consumer friendly document that explains all of the important aspects of a particular mortgage deal before you proceed further.
This information will help you to understand how much the mortgage will cost you, both in terms of monthly repayments and the overall amount that you will repay. It will also help you to compare different mortgage deals to see which is the most suitable for your needs.
A broker or lender is obliged to provide one to you once they have found a mortgage product that they can recommend.
What does a mortgage KFI cover?
A mortgage KFI should cover the following points:
- The amount of the mortgage
- The interest rate, inc. the APRC
- The term of the mortgage
- The repayment method
- Arrangement fees
- Any early repayment charges
- An estimate of monthly repayments
- A breakdown of the total amount repayable, including interest
- The names of the borrowers
- Higher Lending Charge costs
- Valuation fees
- Broker commission
The quote may also contain extra information, particularly if the mortgage product you’re looking at has additional features such as an offset mortgage or a ported product.
It is important to read through the KFI carefully so that you understand all of the charges and terms that apply to the mortgage deal. If you have any questions, you should ask your broker or lender for clarification.
Once you are happy with the deal, you can proceed to fill in a mortgage application form.
It’s helpful to know that all illustrations are specific to one product and one lender. This means that if anything changes, such as new mortgage amount, amended term, different purchase price, the illustration will need to be updated with the new details.
Once your broker has issued you with the first quote, producing others is relatively straightforward. This may allow you to see how much different mortgage sizes, or loan to value, will cost.
A mortgage KFI does not provide a promise of a certain mortgage or a certain interest rate. This means that if some time passes before you make your application the deal you wanted may no longer be available.
You will find more useful information in our: “Guide to Mortgage Fees“
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Is a mortgage illustration the same as an Agreement in Principle?
No, an Agreement in Principle (AIP) is not the same as a KFI.
An AIP is a document that some lenders may provide which gives you an indication of how much they would be willing to lend you. It is based on the information that you have provided and a ‘soft’ credit check. This means that it will not show up on your credit file.
It is important to remember that an AIP is not a formal offer of a mortgage and the lender may still decline your application when you submit it.
Is a mortgage illustration the same as a mortgage offer? – An illustration is merely an outline of a specific mortgage product and so it does not provide a guarantee of a mortgage or AIP. At the point of receiving your KFI quote you will not have made an application to a lender. It’s purpose is to show you the facts and financial aspects of what you might choose to apply for.
How much does the average mortgage cost?
How do I get a mortgage illustration?
Before you receive it the mortgage illustration needs to be personalised to your own circumstances and requirements for a mortgage.
You can obtain a KFI from a lender direct or an independent mortgage broker. Both will need to ask you some questions so that they can build up sufficient information to then search for the best mortgage.
Remember that your mortgage illustration relates to your own situation so the adviser will be asking questions about your income, expenses, employment etc.
LENDER
If you go to a lender, they can only talk about their own range of products. This will most likely mean that they can provide a KFI almost immediately.
MORTGAGE BROKER
On the other hand a broker will have over 100 lenders to consider and many thousands of different products and options. Searching through to find you the best deal may take a day or two depending on the complexity of your situation.
It’s quite possible that your broker presents you with 2 or even 3 quotes to choose from. This is the great advantage of working with a broker, you get lots of choice and they can explain each one in turn.
