What is a mortgage illustration?

What is a mortgage illustration?

Mortgages can seem like a big commitment, and it can seem like all sorts of confusing terms are being thrown around by mortgage providers,  leaving us  wondering what we’re committing to. Luckily, there are actually tools out there that are designed to help you figure it all out. One of those is this blog, and another is a mortgage illustration.

This blog outlines everything you need to know about mortgage illustrations, how to get one, and why you might want one.

What is a mortgage illustration?

A mortgage illustration is a document sent to you by a potential mortgage provider to outline the important details of a potential mortgage. Mortgage illustrations are generally passed on to you after an initial conversation with a potential mortgage provider, after they ask you to provide them with some general information about the kind of mortgage you’re looking for (we’ll go into what information you might be asked to provide shortly).

You should be able to get a mortgage illustration for any kind of mortgage, whether it’s for a buy-to-let property, a commercial property, or purely residential. Mortgage illustrations are designed to help you clarify some details about your potential mortgage, so they can be pretty useful regardless of the  kind of mortgage you’re looking for.

If you’re looking for more general information about mortgages, you can check out our blog ‘First-time buyer mortgage guide

What’s included in a mortgage illustration?

A mortgage illustration should outline all the major financial details of a mortgage, as well as some of the more general terms that you would be committing to if you were to move forward with your mortgage application. Here are the main things you should find in a mortgage illustration:

  • How much might have to pay to secure the mortgage
  • How much your monthly repayments would cost
  • How much the mortgage will cost over the full-term period, including interest
  • The type of interest rate you will pay (e.g. fixed or variable)
  • The interest rate on your mortgage and how interest rates changes would affect you
  • The possibility of over-paying and any consequences for doing so
  • The cool-off period for the mortgage
  • Any special features your mortgage might have (e.g. cashback)
  • What to do if you don’t need the mortgage anymore

Some mortgage illustrations may include details of any fees you might have to pay for lenders, brokers, valuations, or solicitors. This can vary depending on who is providing the mortgage illustration, so it can be worth checking these things so you’re not hit with extra unexpected costs.

Why should I get a mortgage illustration?

The simple answer is that mortgages are pretty complicated, and trying to figure it all out can be a difficult task. Mortgage illustrations are designed to show you all the important information about a potential mortgage as clearly as possible. They can really help you make a much more informed decision on the type of mortgage you might get, and how much it could cost you.

You don’t technically have to get a mortgage illustration, but they can be really useful to get early on in your property search. A mortgage illustration can help you understand your budget better and break down some of the more confusing parts of a mortgage into simple terms. Getting a mortgage is a big decision, and a mortgage illustration can help to make things much clearer.

How do I get a mortgage illustration?

You should be able to get a mortgage illustration from most mortgage providers, brokers or mortgage advisors. They’ll ask you for a certain amount of information so that they can figure out all the details. This is the information you can expect to be asked for when getting a mortgage illustration:

  • How much your total household income is
  • How much money you can put down as a deposit
  • How long you want the fixed term of the mortgage to be
  • How long you want the total term of the mortgage to be
  • How much you want to borrow from the mortgage provider
  • How much the property costs (if you have one in mind

Is a mortgage illustration the same as an offer?

A mortgage illustration is not the same as an offer. They’re not legally binding, so you don’t have to worry that asking for a mortgage illustration commits you to anything. You’re free to simply get a mortgage illustration, then change your mind and walk away. You might have to pay a fee for getting the mortgage illustration, but it’s unlikely to be very much.

For more information about potential brokers’ fees, you can check out our blog ‘Do mortgage brokers charge a fee in the UK?

It’s also worth noting that a mortgage illustration doesn’t take into account things like affordability and credit checks. A mortgage provider will need to do quite a bit more digging into your financial situation before they can actually make you a formal offer. This basically means that mortgage illustrations aren’t binding to you or to the mortgage provider, but they can be a pretty good indication of the potential details of the mortgage.

Is a mortgage illustration the same as an agreement in principle?

The answer to this one is again no, a mortgage illustration is not the same as an agreement in principle. They are fairly similar, as an agreement in principle is sent by your mortgage provider before a credit check and isn’t binding. An agreement in principle is essentially a document saying that the mortgage provider will be theoretically prepared to give you a mortgage for certain terms, but it doesn’t guarantee them until after the credit check. You can see an agreement in principle as the step between a mortgage illustration and an offer.

To learn more about how credit checks can affect a mortgage, check out our blog ‘What stops you getting a mortgage?

Do I have to agree to the terms of a mortgage illustration?

Mortgage illustrations are not binding in any way, so you don’t need to agree to their terms. They’re really designed to give you an idea for what your mortgage could look like so you can decide what to do next, and whether you want to use that mortgage provider. Mortgage illustrations also don’t count as a mortgage application, so they won’t show up on a credit check. It’s also just worth remembering that mortgage illustrations aren’t binding for the mortgage provider either, so your mortgage may look a bit different by the time it comes to getting an offer.

A few final tips…

Mortgage illustrations can be a super useful way to help you understand what your future mortgage might look like and help you make a more informed decision. Here are the last few things to keep in mind about mortgage illustrations:

  • Mortgage illustrations are designed to give you all the important details about a potential future mortgage without binding you to them
  • Mortgage illustrations can help you make a better decision about which mortgage provider to use and what kind of mortgage suits you
  • Mortgage illustrations are not legally binding, and the details of your mortgage might change after the mortgage provider has done all the necessary affordability and credit checks

Urban Jungle is not a financial advisor and information in this article should not be taken as advice or recommendation.