At Millennium Mortgages, “What is a mortgage illustration?” is something we get asked all the time.
A mortgage illustration outlines all the details of a mortgage and is something your mortgage advisor will talk through with you after they have looked into what options are available.
Your mortgage broker will do this prior to submitting the actual mortgage application to a mortgage lender.
Sometimes mortgage illustrations are also referred to as an ESIS, which stands for European Standardised Information Sheet. They are the same as an illustration, just a different name.
At what point in the process will I receive the mortgage illustration?
A mortgage illustration is one of the first pieces of documentation you will receive as part of the mortgage process. You’ll get one of these whether you’re a first-time buyer, remortgaging or have a string of buy-to-let properties.
Mortgage advisors need to gather relevant information from you in order to be able to recommend the most suitable mortgage deals.
The process typically looks like this:
- Book online for an appointment with an advisor
- Initial fact-finding call with a mortgage broker
- Recommendations of most suitable products
- Decision/Agreement in Principle
- Mortgage illustration issued
- Prepare application if happy
- Receive mortgage offer
What information do I need to provide for a mortgage illustration?
You will be asked to provide various different documents and bits of financial information by your mortgage broker. They will usually include:
- Your annual household income
- How much money you have available for a deposit
- Your budget for a new property, or the price of one you have found already
- The total amount you want to borrow from the mortgage lender
- An idea of how long you wish the fixed term length to be
- How many years you want your mortgage term to be
Knowing all of this information, your broker will be able to draw up an accurate illustration.
Why do I need a mortgage illustration?
A mortgage illustration is designed to make it easier to understand what’s included in an offer, why it is suitable for your personal and financial situation, and to ensure that you fully understand the mortgage terms.
A mortgage illustration allows you to see the terms in a clear, simple way and gives an overview of the product before you agree to your mortgage.
How long is it valid?
The mortgage market changes constantly, and specific products are regularly withdrawn and replaced with alternatives. Most illustrations, therefore, are only valid until the mortgage deal you choose expires.
Before your advisor submits your mortgage application, they should notify you of any changes that may have happened in the market.
What information does a mortgage illustration consist of?
A mortgage illustration outlining the key elements of the recommended product will always be issued. Included in a mortgage illustration will be:
- What happens if interest rates rise, and how this could affect your repayments
- If there are any special features of the mortgage
- What happens if you don’t want the mortgage anymore
You should read this document carefully before applying, but if you have any questions, please reach out to your advisor.
Main details
The offer document should always confirm who the chosen lender is, the total mortgage amount, and what your monthly repayments will be. The fixed contract term period for which the offer is valid is also included.
Product costs involved
All costs should be outlined in an illustration document.
This will include:
- Your monthly mortgage repayments
- Any charges you have to pay upfront
- The overall cost of the mortgage, including interest rate, for the full mortgage term
- Broker fees
- Sometimes valuation fees and legal fees are also outlined
- Property survey fees will not usually be included unless this has been arranged through the lender
Monthly repayments
In the illustration document, it will outline what will happen if interest rates rise, and how this could affect your repayments.
It will also state if you can make overpayments and if there are any penalties for doing so.
Does receiving a mortgage illustration guarantee me a mortgage?
Unfortunately, an applicant is never guaranteed to secure a mortgage prior to being officially accepted when an offer is made.
A mortgage illustration will be issued after your mortgage broker has made their mortgage recommendation based on your initial appointment when you likely won’t have provided any documents to evidence your income, proof of deposit or affordability yet.
Do I have to accept the mortgage illustration?
Your dedicated mortgage advisor will have specifically selected a mortgage product for you based on your personal and financial circumstances, however, you are not required to proceed with the recommended product.
What’s the difference between a mortgage illustration and an agreement in principle?
Before receiving your mortgage illustration, you will get a Decision/Agreement in principle (DIP/AIP). This is a basic document that only shows what a lender is willing to let you borrow based on being able to evidence your income, deposit, and affordability. This is not the same as a mortgage illustration.
Speak to Millennium Mortgages
If you’re looking for some advice, or need any more mortgage tips, book a free mortgage appointment online with one of Millennium Mortgages’ trusted advisors.
The information contained within was correct at the time of publication but is subject to change.
Mike Plaster is CeMap qualified CAS status Mortgage and Protection Adviser able to assist on both Residential and Buy To Let Mortgages as well as Life Insurance, Critical Illness Cover and Income Protection.