What is a mortgage illustration?

During the mortgage application process, you will receive a mortgage illustration. This begs the question, "What is a mortgage illustration"? To fully answer the question, first there are several factors to consider,

What exactly is a mortgage illustration?

A mortgage illustration is a document that your lender provides for you. The document explains some key points regarding your mortgage. Either the lender or, if you are using an advisor, will provide you with the mortgage illustration or mortgage quote. Generally, this is provided to you along with the mortgage offer. Included in the mortgage quote, you will find the following:

• The total amount of your monthly repayments.
• Any costs, fees, or extra charges for securing the mortgage.
• The type of interest you will pay, which is usually fixed or variable.
• The interest rate that will apply to your mortgage. In addition, how increases or falls in the interest rate will affect you.
• The total cost of the mortgage over the full term. This includes the amount of interest due.
• Whether the mortgage contains any distinctive features.
• The cooling-off period.
• Whether overpayments are allowable and any penalties involved for making overpayments.
• What to do if you no longer require the mortgage.
  
  

Information needed from you to obtain a mortgage illustration

• The price of the property you wish to purchase.
• The amount of the deposit you have.
• The amount you wish to borrow from the lender.
• How long do you require the mortgage to be?
• If opting for a fixed term, how long do you require the fixed term to be?
• Your annual household income.
  
  

By providing this information, the lender or advisor can produce an accurate mortgage quote.

Do I need a mortgage illustration?

Mortgages can be confusing for many people. Furthermore, if you are not a specialist in the mortgage market, securing the loan can be frustrating and, at times, daunting.

It's important to understand that a mortgage illustration is designed to help you easily select the best mortgage for your needs. Moreover, it allows you to fully understand the terms of the mortgage.

Specifically, it allows you to view all the terms of the mortgage in a clear and easy-to-understand format.  

Also, when comparing different mortgages, an illustration is a valuable tool. You can compare different potential mortgages side by side. Therefore, the decision-making becomes simpler and, as such, speeds up the entire process.

Is a mortgage illustration the same as a mortgage offer?

A mortgage offer is different from a mortgage illustration. An offer is made by the lender at a later stage of the application process. Following credit checks and an affordability assessment, the lender will typically extend a mortgage offer to you. However, you will not need a credit check to receive a mortgage illustration. As such, it will not affect your credit score.

What is an agreement in principle?

An agreement in principle is not credit checked. As such, it is not binding and does not represent an offer. However, it is a document from the lender indicating that they are likely to lend to you. The agreement in principle does take your affordability and financial situation into account.

What is a mortgage illustration, and why is it necessary?

When considering taking out a mortgage, an illustration can help you decide what the best mortgage is for you. An illustration will highlight some key points, such as:

• Affordability.
• Terms and conditions.
• The length of the mortgage.
• The amount of interest payable.
• The cost of the mortgage over the full term.
  
  

It's important to realise that many people obtain a mortgage illustration or quote before they begin searching for a property. For example, if you know how much property is selling for in an area you like, you can obtain an illustration based on that. As such, you can determine if you can afford a mortgage of that amount.

Likewise, you can obtain an illustration if you have found one or more properties that you are considering purchasing.

Are illustrations available for all types of mortgages?

Mortgage illustrations are not just for residential mortgages. You can ask your lender or advisor for a quote for any mortgage. This allows you to clarify the mortgage terms.

Am I eligible for a mortgage?

Affordability is one of the main criteria for obtaining a mortgage. The amount of money you have as a deposit, and how much you are earning, are two key factors in determining how much you can borrow. You can use other tools, such as a mortgage calculator, to establish if the mortgage is affordable for you. This allows you to determine whether the property is right for you in terms of your personal circumstances. As such, you can then contact a mortgage broker for further information and expert advice. They can also help you through the entire process.

Summary of what is a mortgage illustration

• It is a document provided to you by the lender or mortgage advisor.
• The document explains the terms and conditions of the mortgage.
• It helps to clarify the mortgage before you decide.
• It is not an offer.
• An offer is made by the lender after credit and affordability checks have been completed.
• An application does not affect your credit score.
• You can apply before or after you start your property search.
• It is is available for all types of mortgages.
  
  

Finding the most suitable mortgage for your personal circumstances can be a time-consuming and confusing process. As such, using the services of a mortgage advisor or broker can be beneficial. They can guide you through the entire process and recommend the most suitable mortgage for you. 

Regulated Advice works with mortgage advisors who cover the entire UK. As such, if you are confused or short of time, let us help you find a local advisor to take some stress away and speed up the process.