What is a Key Facts Illustration?

When you get a mortgage, the process can be confusing to say the least. 

If you’re not using a mortgage broker who can explain the complexities, understanding a mortgage can be an extremely daunting task.

Throughout the process you will be given plenty of paperwork to read over or sign. 

Among which will be a Key Facts Illustration.

If you’re wondering what a Key Facts Illustration is don’t worry, this guide explains everything you need to know.

What is a Key Facts Illustration?

A Key Facts Illustration is a personalised document that mortgage brokers create for you before you accept an offer of credit. It will outline the key facts on your chosen mortgage deal.

Mortgages are highly regulated in the UK and overseen by the Financial Conduct Authority (FCA). 

The FCA is a regulatory body that sets rules and guidelines for all financial services companies that operate in the UK.

One of the rules set out by the FCA is that customers should only be given products that are suitable for their needs and current financial situation. 

In order to ensure that the mortgage is compliant you will need to complete a fact find questionnaire which will allow the lender or broker to gain a full understanding of your financial situation.

You will be asked about your current income and expenditure as well as any debts you may have. 

You will also be asked about a range of other factors as well so that the lender can build a full picture of your life.

Once the questionnaire has been completed the lender or broker will find the product that fits your needs and make a recommendation. 

This product information will be provided in what’s known as a Key Facts Illustration.

Being provided with a Key Facts Illustration allows you to do a number of things. You will first and foremost have a complete overview of the mortgage you’re being offered by that lender. 

It is unfortunately common that people waste time walking into every bank on the high street trying to find the best deal when a broker could do it much faster and find a better mortgage in most cases. 

Having a Key Facts Illustration however does allow you to compare mortgages side by side as well.

On rarer occasions a broker may even provide two Key Facts Illustrations as there may be two options that you might want to consider for example if you wanted to decide between a 2-year fixed term product or a 5-year fixed term product.

What Does a Key Facts Illustration Cover?

A Key Facts Illustration gives you all of the information about the mortgage. This includes:

• How much you’re borrowing.
• The total amount repayable.
• The term of the mortgage.
• Early repayment charges.
• The interest rate of any fixed term period.
• The length of the mortgage ‘deal’ fixed period.
• Any penalty charges that may apply to the mortgage.

A Key Facts Illustration may also contain more information, especially if the mortgage product you’re looking at has additional features such as an offset mortgage.

What Information Do I Need to Provide to Get a Key Facts Illustration?

To obtain any product recommendation you will need to complete the fact find questionnaire mentioned above.

To do this you will likely need to collect information beforehand to ensure that everything you answer is accurate.

Before completing a fact find questionnaire it is worth checking your credit score. You can do this for free by registering with Check My File. 

Checking your credit report will give you a full breakdown of any money you owe to companies and any defaults or CCJs you might have.

You can then provide this information to your broker so that they can find a mortgage product that fits your credit rating.

Other than existing debts, you will need to outline your expenditure. You will need to provide a breakdown of your monthly outgoings including any rent payments, childcare costs, food and bills (and other expenditures).

You will also need to provide information about the property value you’re looking at and the deposit amount. You will be asked for the source of the deposit but you won’t need to provide evidence of that until the mortgage application.

How Long are Key Facts Illustrations Valid For?

In real world terms, a Key Facts Illustration is only really valid on the day it is issued. This is because lenders can remove mortgage products overnight or change terms and conditions on their products. 

However, more often than not, a Key Facts Illustration will be valid for a number of days and possibly even weeks. 

If you have a change in your circumstances or the market changes, you will need to discuss this with your broker and find out whether the Key Facts Illustration they’ve provided is up to date.

If it isn’t, this is not a problem as they can provide an updated Key Facts Illustration for that mortgage or if it is no longer available, find you an alternate mortgage deal.

What is the Difference Between a Key Facts Illustration and an Agreement in Principle?

A Key Facts Illustration is designed to inform you about the mortgage you’re looking to take out without you needing to commit to that product.

If you’re happy with the information detailed in the Key Facts Illustration, then you can ask for an agreement in principle from the lender or broker.

What is an Agreement in Principle?

The agreement in principle uses the basic information provided from the fact find questionnaire. This information is put into the lender’s system and they will conduct a credit check.

The credit check is often a soft credit check, but some lenders still do hard credit checks that show on your credit record. Because of this, it is best to ensure you want to proceed with an agreement in principle before you commit to it.

Multiple hard credit searches on your record can damage your credit score. Your broker will be able to tell you if the lender is using a hard or soft credit search.

The agreement in principle is exactly as it sounds. It is a formal acknowledgement from the lender that providing the information you supplied was correct they will lend on that basis.

You can then use an agreement in principle to make offers on properties with most estate agents requiring them in order to take the offer seriously.

It is important to remember that although an agreement in principle is a good indication that a mortgage is available to you, it is not set in stone, and you will still need to complete a full mortgage application in order to get a mortgage offer.

Here are some of the things that can cause problems between an agreement in principle (AIP) and a full mortgage offer:

• Information at AIP was incorrect.
• The property you want to purchase doesn’t meet the lender’s criteria.
• Source of deposit can’t be evidenced.
• Income changes that negatively impact the amount you can borrow.

This list is not exhaustive because mortgages can be complex – there are a myriad of things that can change between the AIP stage and the application stage. You should keep your broker updated about any important changes throughout the process as it may mean that they need to change the advice they’re giving you.

What Other Documents Are Important When I Get a Mortgage?

The process of getting a mortgage can be broken down into 5 easy steps.

Enquiry This is the initial stage where we will ask what you’re looking to achieve and then complete the fact find questionnaire. Boon Brokers will then look at the whole UK mortgage market and find a mortgage that fits your needs.

Key Facts Illustration Once we have found the best product for you, we will send you the details with theKey Facts Illustration. If you’re happy with the information provided you can ask for an agreement in principle.

Agreement in Principle This will be an informal agreement from the lender that they will offer your desired product, subject to their lending requirements. You can take the agreement in principle to estate agents to make offers on properties.

Full Mortgage Application Once you have found the perfect property, you will need to submit a full mortgage application. When using Boon Brokers, we complete this for you and deal with the lenders directly to alleviate the stress that this part of the process normally causes.

Lenders often ask more detailed questions at this time and require evidence to approve the mortgage. 

Mortgage Offer Once a lender is satisfied that you meet their criteria, they will make a formal mortgage offer. Your broker will provide this alongside details of the full advice they have provided to you and why this mortgage was recommended.

You should read this information thoroughly and carefully to check it meets your needs and everything is correct before accepting.

During the process you will collect paperwork documenting everything. By the end you should have the following as a minimum:

• Affordability calculation
• Key Facts Illustration.
• Agreement in principle.
• Mortgage offer.

All documentation provided during a mortgage process is important and you should remember that a mortgage is probably going to be the biggest financial decision you make in your life.

You should keep this documentation safe and read through all of it as you receive it.

Conclusion

A Key Facts Illustration is a great way for you to understand the mortgage you’re being offered and also compare it to other mortgages that you may be considering.

They outline vital information about the mortgage without you needing to commit to it. You will be able to see the penalties, costs and early repayment charges attached to the mortgage.

The idea of a Key Facts Illustration is to provide customers with a transparent overview of the mortgage with everything presented clearly. There are no hidden costs with a mortgage, a lender must provide details of all costs and penalties to customers.

We understand that the mortgage process can be stressful and daunting, especially if you’re not feeling confident about how mortgages work.

At Boon Brokers we provide FREE, impartial, no obligation advice that is tailor made to your circumstances and needs.

Contact us today to discuss your mortgage needs!