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What is a mortgage illustration?

what is a mortgage illustration

A mortgage is a very intricate term under finance and most people are unable to understand this term comprehensively. For an average man or female, the terms related to mortgages can be confusing and difficult to understand but you don’t have to worry anymore because we got you covered. In today’s article we will explore the topic of mortgage illustration, What is a mortgage illustration? Why do we need it, What are the benefits of it, What is included in it, How you can get a mortgage illustration, and many more important details about mortgage illustration. So without any further talk let’s jump right into the article.

What is a mortgage illustration?

Source: MoneymanTV

A Mortgage illustration is a type of document that will include some crucial information regarding your potential mortgage. During the period of obtaining a mortgage, you will reach a point where your mortgage advisor will provide you with the mortgage illustration. You will be provided with a mortgage illustration after the initial talk with your mortgage provider, the mortgage provider will get insights into what type of mortgage you want, whether it is a commercial property, a residential mortgage, or a buy-to-let property, mortgage illustration will be surely provided to you.

Mortgage Ilustraion is very useful regardless of your chosen mortgage, it usually features the potential information related to your potential mortgage. The mortgage provider will clarify and review all the details present in the mortgage illustration after making their recommendation.

What is included in a mortgage illustration?

A mortgage illustration will consist of all the general details related to the mortgage as well as some general terms of finance. Here are the major details you will find inside a mortgage illustration.

  • The mortgage illustration will include details related to your monthly repayments.
  • Any Upfront fees or charges you have to pay before getting a mortgage.
  • The mortgage illustration will include The full cost of the mortgage which encapsulated the initial interest and the interest rate over the full mortgage term.
  • Details related to APRC which refers to the Annual Percentage Rate of Charge. (More details below)
  • Details related to the interest rate charged and also what type of interest rate is used (fixed or variable).
  • What will happen if the interest rates rise and how they will affect your repayments?
  • Mortgage illustration will also include all the special features of the mortgage such as the ability to underpay or overpay or cashback.
  • Can you do overpayments and whether you will face any penalties for doing so?
  • It will also feature what will happen if you somehow lose interest in your mortgage and don’t want it anymore.
  • Last but not least will also conclude The span of the reflection period.

Before making any further decisions you should read the document carefully because sometimes mortgages can include hidden fees as well so it is better to check everything before any further advancement and if you find something concerning or suspicious you may talk to your advisor about that.

What is APRC?

ARPC may look like an alien term but it is not, it is usually included in the Mortgage Illustration. ARPC stands for “Annual Percentage Rate of Charge”. APRC takes charge of fees to present the total cost of your mortgage.

Your Mortgage Illustration should feature all the details related to the fees included in this calculation. APRC is calculated using a standard method that is widely across the world. This method makes it easier for us to compare two different lenders at once.

Why do I need a mortgage illustration?

If you are unaware of the full mortgage process or you don’t have a piece of in-depth knowledge about this topic, these terms can be difficult for you. while mortgage illustration is not necessary for everyone but it can be very beneficial for you considering you are a noobie in this field. The mortgage illustration provides tailored choices that make it easier to choose the right mortgage for you.

This document can be very useful for you especially when comparing two different mortgages side by side it can help you choose the better one by comparing all the aspects with efficiency and speed. Mortgage illustration provides a clear-cut image of your potential mortgage and it is highly recommended to get one for yourself, especially when you don’t know everything about mortgages.

How do I get a mortgage illustration?

Getting a mortgage illustration is not difficult, all you need to do is ask your mortgage provider or advisor to give you one if they haven’t provided you one yet. They will just ask a couple of things related to your household to figure out all the details related to what mortgage will be the best choice for you.

Things they may ask you:

  • They can ask you how much you earn or your total household income.
  • They can ask you how much money you are willing to put in as a deposit.
  • They can ask you Duration of the fixed term of the mortgages you want
  • They can ask you the duration of the total term you want
  • They can ask how much money you want to borrow from the mortgage provider.
  • They can ask you the price of the property if you have one in mind.

Also Read:

Why do some people call mortgage illustration an ESIS?

Basically, ESIS stands for the “European Standardised Information Sheet” which is another mortgage illustration, mostly used in the European region. Both are the same don’t confuse them with two different terms, both serve the same purpose.

Are a mortgage illustration and an offer for a mortgage the same thing?

In simple words a mortgage illustration and an offer are not the same, you don’t have to worry about anything. You are not committing to anything, you can just walk away if you are not satisfied by the mortgage illustration. Although in some cases you might have to pay a fee associated with getting a mortgage illustration which is usually not that much.

For additional information regarding broker charges in the UK, you can check out our article: Do Mortgage Brokers Charge a Fee UK

The point to be noted is that a mortgage illustration does not provide any information regarding things like affordability and credit checks. Your mortgage provider might have to get deep knowledge of your financial situation before making any formal offer.

This fundamentally means that the mortgage provider or the mortgage illustrations aren’t binding to you by any means, but they can rather be a very good indication of the potential details of the mortgage.

Is it necessary to agree to the terms of a mortgage illustration?

As we already told you, the answer is no, you can walk away if you don’t like the recommendation. You can talk with your advisor and get some other recommendations as well. Mostly there are no fees associated with the mortgage illustration but it is good to be double sure, read our above article to get further insights into this topic.

Does going through a mortgage illustration guarantee me a mortgage?

The answer to this question is intricate, you may or may not get your desired mortgages. We know everyone wants a mortgage but no one can give you a surety, you may or may not get the mortgage. The process of approval also depends on the lender.

If anyone, provides you with a mortgage illustration, that means the broker has found a compatible mortgage for you that can be beneficial for you but it does not guarantee that you will definitely get the mortgage. The brokers still have to submit your application to the lenders and wait for the response.

If you are totally eligible or you have a prior agreement in principle, there’s still a chance that your application may get rejected. The reasons could be bad credit scores, Not enough income evidence, or any other problems related to property.

What are the differences between a mortgage illustration and an agreement in principle?

The answer is once again no, a mortgage illustration and an agreement in principle are not the same. They are relatively similar, the agreement and the illustration both are non-binding. The agreement was sent before a credit check by the mortgage provider. Think of the agreement as the ladder to get to the rooftop, the rooftop is the offer and the floor is the mortgage illustration. It is basically a document that states that the mortgage provider is ready to give you a mortgage in accordance with certain terms, However, it does not provide a guarantee until a credit check has been conducted perfectly.

Note: PrimeEducate does not serve as a financial advisor, and the information presented in this article should not be considered advice or a recommendation.