What the Key facts illustration says about your mortgage

The key facts document is a document which explains the features, benefits and risks of your financial product. This will be given to you before you accept the offer of credit. They key financial document has to be given to you before you accept an offer of credit and if it isn’t then you might have been mis sold a financial product . In 2018 the key financial document is being replaced by the European standard information sheet.

The Key facts illustration documents is a document which must be provided to you before you accept an offer of credit. When applying for a mortgage the key facts illustration document will be provided once you have received a mortgage offer. It will explain why it is important you understand the information on it and how you can get a better mortgage deal. 🔥They key facts illustration document will also explain the product features, risks and general structure. It will explain any chargers, the interest charged and any future fees you might expect to pay.

The Initial disclosure document💧

When you engage a mortgage lender or mortgage broker they will provide you with an initial disclosure document which will explain what they will offer you, the scope of their service, the providers they have access to, any special mortgage deals they have access to, what fees they will charge you and if they will be compensated by the mortgage lender.

But you should also go a step further so you can get maximum clarity. Here are some points you should ask the lender or mortgage broker to explain to you in writing:

Is the mortgage lender or broker providing advice or providing the information on an information only basis and hence you are taking out an execution only mortgage which is where you have done the research and made the decision on which product you should take out.

The downfall of this is that it is very unlikely you would have the same or an equal level of experience as a digital mortgage broker or advisors so if anything goes wrong with your mortgage in the future or you find the product was unsuitable for you then you will have most if not all the blame. This is why you must inquire from the mortgage broker or lender in the first instance what sort of advice they are providing you, especially if you are paying for it.

What mortgages are they offering to you? Are they simply offering mortgages from one provider(as most mortgage lenders will do) or are they covering the whole of market .

You should be aware that brokers who say they are offering a whole of market mortgage advice don’t actually have access to every single mortgage in the whole market but are simply allowed to use that phrase due to the number of providers they have access to. Mortgage lenders must also tell you if they are offering interest only mortgages and offer specialist advice in this case. They must also be able to say why they made this recommendation and explain this to you.

Mortgage lenders and brokers must also tell you how much their service will cost and how this is charged. They must tell you if it is a flat fee, a percentage of the mortgage or an hourly rate. They must also tell you if they get paid commission.

You must also be told which mortgages are being offered. Mortgage lenders will typically only offer you their own mortgage but mortgage brokers usually have a wider reach although they may still have some limitations as to how many and which mortgage providers they cover.

What is on the Key facts illustration document?🚩

**The key facts illustration document for a mortgage will include:

• Your monthly mortgage repayments
• The APR and if it is variable rate mortgage or fixed interest mortgage.
• The total cost of the mortgage over the full mortgage term
• A stress test showing what an interest rate rise will do to your monthly mortgage repayments.
• If the mortgage has any unique features such as being flexible, allowing you to overpay or underpay
• If there any fees or limits attached with the flexibility of the product. E.g overpayment limits and fees.
• Your cancellation period
• Any upfront fees or charges you have to pay to get the mortgage

The key facts illustration document makes it easy for you to compare the total cost of mortgages from different lenders as it provides you with a summary of all the key information on one place.

Sample of the key facts illustration

Below is a sample of the key facts illustration used by the Help to buy scheme recently.

“ First-time buyer declaration

Customer Details:

Full Name:

Date of Birth:

Help to Buy: ISA account number

National Insurance Number:

Address of the Property that is being acquired (the “Property”)

Purchase Price of the Property:

Is the Property in London: Yes/No

I confirm by signing this First Time Buyer Declaration that:

1. I am resident in the United Kingdom for tax purposes or, if not so resident, either perform duties which, by virtue of
   section 28 of the Income Tax (Earnings and Pensions) Act 2003 (Crown employees serving overseas), are treated as
   
   being performed in the United Kingdom, or I am married to, or in a civil partnership with, a person who performs such
   
   duties.
   
2. I do not own, and never have owned any interest in land, whether in the United Kingdom or elsewhere, which:
   (A) is:
   
   (i) in England or Wales:
   
   (a) freehold;
   
   (b) leasehold, where the lease was originally granted for a term certain exceeding 21 years; or
   
   (c) commonhold; or
   
   (ii) in Scotland, registered or recorded, or would be capable of being registered or recorded, as a right of absolute
   
   ownership in the Land Register of Scotland or General Register of Sasines in Scotland, as applicable; or
   
   (iii) in Northern Ireland:
   
   (a) freehold; or
   
   (b) leasehold, where the lease was originally granted for a term certain exceeding 21 years; or
   
   (iv) an equivalent interest in land to the interests in land listed in paragraphs (A)(i) to
   
   (iii) above under the laws of any jurisdiction outside the United Kingdom; and
   
   (B) comprises a building that is used or suitable for use as a dwelling, or is in the process of being constructed or
   
   adapted for such use; and
   
   (C) (i) which I acquired as a purchaser by way of sole or joint ownership; or
   
   (ii) which entitles me to possess or occupy that land.
   
3. I have not previously received payment of a Bonus under the Help to Buy: ISA Scheme Rules (unless the full amount of
   such Bonus has subsequently been repaid to the Administrator in accordance with the Scheme Rules).
   
4. I intend to occupy the Property as my only or main residence and will, following the acquisition of the Property,
   occupy the Property as my only or main residence.*
   
   or
   
   As a consequence of being either a member of the Regular Forces or the Reserve Forces (each as defined in section
   
   372 of the Armed Forces Act 2005) or the spouse or civil partner of a member of the Regular Forces or the Reserve
   
   Forces, I am unable to occupy the Property as my only or main residence at the time of acquisition of the Property but
   
   intend, in the future, to occupy the Property as my only or main residence.**[Please delete as appropriate]
   
5. I have operated my Help to Buy: ISA in accordance with the terms and conditions of the Scheme Rules and am not
   aware of any circumstances which would mean that I would not be entitled to receive a Bonus payment under the
   
   Scheme Rules.
   
6. I understand that making a false or misleading statement in this First Time Buyer Declaration may give rise to
   personal liability and may, in accordance with the Scheme Rules, cause the amount of any Bonus payment that I
   
   receive to become immediately due and payable to the Administrator.
   
   Signed ………………………………………………………………. Date ………………………………………………………………..”
   

Are you really getting mortgage advice?😱

Mortgage advice is very key as it offers a lot of protection if things go wrong down the line. You will be able to take your case to the financial ombudsman if you don’t get the resolution you were after from the business.

Mortgage advice is usually offered on most mortgage sales but in some exceptions e.g where you refuse the advice the you will be essentially doing an execution only mortgage which offers you less to fall back on if things go wrong.

In this case, the mortgage broker or lender will write to you to make it clear that you have not taken mortgage advice but have simply done an execution only mortgage where the mortgage lender or broker has not assessed the suitability of the product you are taking.

Use a mortgage broker for your mortgage in principle

You may want to use an independent mortgage broker to help you get a mortgage on your new home.

Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.

This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.

A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.

After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle. 

This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application. 

Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.

This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.

It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.

If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.

Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.

They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.

This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.

If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.

You can also contact the debt charity “Step Change” if you are in debt and need help.