What Is a Mortgage Illustration?
A mortgage illustration is a document that sets out the key features and costs of a particular mortgage based on your circumstances. It can include the interest rate, monthly repayments, mortgage term, fees, total amount repayable and any early repayment charges.
You will normally receive a mortgage illustration before applying for a mortgage. Its purpose is to help you understand the product being considered or recommended and the costs involved before you decide whether to proceed.
The illustration is usually based on information such as the amount you want to borrow, the property value and your chosen mortgage term, so the figures are specific to the mortgage being discussed.
You may also see the term European Standardised Information Sheet (ESIS). This is another standardised mortgage document designed to give you important information about the mortgage, its costs and its key features before you proceed.
Is a mortgage illustration the same as a mortgage offer?
No. A mortgage illustration and a mortgage offer are two different documents.
A mortgage illustration gives you information about a particular mortgage before the application is completed. It shows the product’s main features, costs and payments, but it does not confirm that the lender has approved your mortgage.
A mortgage offer is issued later, after the lender has assessed your application and completed the checks it requires. These can include affordability, credit checks, income verification and a property valuation.
Receiving a mortgage illustration is therefore an important step in the mortgage process, but it should not be treated as confirmation that your mortgage has been approved.
Mortgage Illustration vs Agreement in Principle vs Mortgage Offer
| Document | What is it? | Does it mean your mortgage is approved? |
|---|---|---|
| Agreement or Decision in Principle | An initial indication that a lender may be prepared to lend based on limited information and preliminary checks | No |
| Mortgage Illustration / ESIS | Details of a particular mortgage product, including its costs, payments and key features | No |
| Mortgage Offer | The lender’s formal offer after it has assessed the mortgage application | Yes, subject to the terms and conditions of the offer |
These documents appear at different stages of the mortgage process and should not be confused with one another. An Agreement in Principle gives an initial indication, the mortgage illustration explains the proposed product, and the mortgage offer is issued once the lender is satisfied with the application.
Is a mortgage illustration the same as a Mortgage in Principle?
No. A Mortgage in Principle, also commonly called an Agreement in Principle or Decision in Principle, is different from a mortgage illustration.
A Mortgage in Principle is normally obtained earlier in the process and gives an initial indication of how much a lender may be prepared to lend, subject to a full application and further checks.
A mortgage illustration relates to a particular mortgage product and explains its costs, payments and important features.
Neither document should be confused with a formal mortgage offer.
Not Sure How To Read A Mortgage Illustration?
Mortgage illustrations contain a large amount of information and can often feel overwhelming, especially for first time buyers or those remortgaging.
At Kerr & Watson, we explain every part of the illustration clearly so you understand the costs, risks and benefits before making a decision.
What Information Is Included In A Mortgage Illustration?
A mortgage illustration contains detailed information about the mortgage you are considering. Depending on the mortgage, this can include:
- The mortgage lender and product
- The amount you want to borrow
- The mortgage term
- Whether the mortgage is repayment, interest-only or a combination
- The initial interest rate and how long it applies
- What happens to the interest rate afterwards
- Your expected monthly payments
- The Annual Percentage Rate of Charge (APRC)
- Product, valuation or other mortgage-related fees
- The overall cost of the mortgage
- Early repayment charges
- Any permitted overpayments
- Important conditions or features of the mortgage
You should read the illustration carefully before proceeding, particularly the sections dealing with payments, fees, what happens when an initial rate ends and any charges for repaying the mortgage early.
Does receiving a mortgage illustration mean you have been approved?
No. Receiving a mortgage illustration does not mean your mortgage has been approved.
An illustration can be produced before a lender has completed the full assessment of your circumstances. The lender may still need to review your income, expenditure, credit history, supporting documents and the property being mortgaged.
Your mortgage is not formally offered simply because an illustration has been produced.
What Happens After Receiving A Mortgage Illustration?
What happens next depends on where you are in the mortgage process.
If you are happy with the recommended mortgage and want to proceed, the next step will usually be to submit the full mortgage application.
The lender can then complete the checks it requires. These may include:
- Reviewing your income and supporting documents
- Assessing affordability
- Carrying out credit checks
- Reviewing your bank statements where required
- Valuing the property
- Asking for additional information through the underwriting process
- If the lender is satisfied with the application and the property, it can then issue a formal mortgage offer.
Receiving the illustration itself does not guarantee that the application will reach mortgage offer stage.
Where does the mortgage illustration fit in the mortgage process?
A typical advised mortgage application may broadly follow this order:
- Initial discussion
- Agreement in Principle
- Mortgage recommendation
- Mortgage illustration
- Full mortgage application
- Underwriting and valuation
- Mortgage offer
- Legal work
- Completion
The exact order can vary depending on the lender and your circumstances.
Can the mortgage illustration change?
Yes. A mortgage illustration is based on the mortgage product and information available when it is produced.
A revised illustration may be required if something material changes before you proceed, such as:
- The amount you want to borrow
- The mortgage term
- The property value
- The interest rate or mortgage product
- Fees being added to or removed from the mortgage
- The repayment method
The final mortgage offer should reflect the terms the lender is actually prepared to offer you, so it is important to check the offer rather than relying solely on an earlier illustration.
How long is a mortgage illustration valid for
There is no single validity period that applies to every mortgage illustration.
The document reflects the mortgage product and information available when it is produced. Mortgage products and interest rates can change, so an illustration produced previously may no longer reflect the mortgage available when you are ready to apply.
Where the document gives a specific validity date or indicates that information may change, you should check this carefully.
If the mortgage product changes before your application is submitted, your adviser can provide an updated illustration for the new product.
Can you have more than one mortgage illustration?
Yes. You may receive more than one mortgage illustration during your mortgage search or application.
For example, your adviser may discuss alternative mortgage products with you, or a revised illustration may be produced if the product, mortgage amount or term changes.
Receiving an illustration does not commit you to taking that mortgage, although you should discuss any proposed changes with your mortgage adviser before proceeding.
Find out Your Options
What should you check on your mortgage illustration?
Before proceeding with a mortgage, check that the illustration matches what you have discussed with your adviser.
In particular, look at:
- The mortgage amount
- The mortgage term
- The repayment method
- The initial interest rate
- The monthly payment
- What happens when the initial rate ends
- Product and other fees
- Whether any fees are being added to the mortgage
- Early repayment charges
- Overpayment allowances
- Any important product conditions
If something does not look right or you do not understand part of the illustration, ask your mortgage adviser before proceeding with the application.
Does getting a mortgage illustration affect your credit score?
The illustration itself does not affect your credit score. However, a lender may have completed a credit search at another stage of the mortgage process, such as when obtaining an Agreement in Principle or submitting the full application. Whether that search is recorded as a soft or hard search depends on the lender and stage of the application.
Do you have to sign a mortgage illustration?
A mortgage illustration is primarily designed to provide you with information about the proposed mortgage. Your adviser or lender may have its own process for confirming that documents have been received or that you wish to proceed, but the illustration itself should not be confused with the formal mortgage offer or mortgage deed.
Can a mortgage illustration be withdrawn?
The mortgage product shown in an illustration can become unavailable before you apply, for example if the lender withdraws or changes the product. If this happens, a different mortgage may need to be considered and a new illustration provided.
Conclusion
A mortgage illustration is an important document that explains the costs and key features of the mortgage you are considering, but it is not the same as a mortgage offer and does not mean your mortgage has been approved.
Check the mortgage amount, term, interest rate, monthly payments, fees and early repayment charges carefully before proceeding.
If you decide to continue, the next stage will usually be the full mortgage application, followed by the lender’s underwriting and property valuation before a formal mortgage offer can be issued.
At Kerr & Watson, we will explain the mortgage we recommend, provide the relevant illustration and answer any questions before your application is submitted.
Need Help Understanding A Mortgage Illustration?
At Kerr & Watson, we explain every part of your mortgage illustration and help you compare options with confidence.
Whether you are buying your first home, moving house or remortgaging, we can help you understand exactly what your mortgage will look like before you commit.
Speak to Kerr & Watson today for personalised mortgage advice.
