Documents explaining your mortgage
When you apply for a mortgage you will be provided with an offer document containing information about a firm’s service including a mortgage illustration d. Alternatively, you can ask for it at any time. This guide explains why it’s important that you understand the information and documents you will receive.
Key messages about the mortgage service
Ask your lender or adviser to explain their mortgage service on your first meeting or when you contact them and ask for it in writing.
The ‘key messages about the mortgage service’ must be explained to you when you talk to your lender or mortgage adviser.
It has to cover:
- Whose mortgages you are being offered – for example a lender will generally only offer their own mortgages whereas a broker might arrange mortgages from across the whole market. They must make it clear to you if there are any limitations in the range of mortgage products they provide. You need to know how much of a choice you’ll have.
- If there’s a fee for the service. This might be nothing, a flat fee, or a percentage of the mortgage amount, or both. You should also be told if an adviser gets paid commission.
- That regulated advice will be provided unless it’s on an execution only basis only (see below)
- The firm’s membership of the Financial Ombudsman Service and the Financial Services Compensation Scheme
- The name of the firm, contact details and registration number
The role of the FCA as a regulator. This information must be provided at an early stage of the sales cycle. But there’s no longer a requirement to provide this all-in-one document, in a prescribed form or at the same time. Although many lenders continue to provide this information in one document.
Getting a mortgage without advice
Some lenders might let you apply for a mortgage without taking advice. You can do this online, or by post with an application form. But you’ll need to know the details of the mortgage you want and be able to arrange it yourself without speaking to an adviser.
You might be able to ask a lender or adviser to arrange your chosen mortgage deal without giving you any advice, if you’re a mortgage professional with a good understanding of the risks involved, remortgaging a home to raise money for business purposes or a ‘high net worth individual’, which means you have an annual income of £300,000 or more or assets worth £3m or more.
An adviser or lender will need evidence that you fall into one of these groups before they can arrange anything for you. They’ll let you know what information they need. If you choose to get a mortgage without advice, your lender or adviser must tell you in writing (or in conversation) about the legal protection you are giving up.
Do you need to pay for mortgage advice?
You don’t necessarily need to pay an upfront fee for mortgage advice as some mortgage brokers offer a fee-free service.
Instead of getting paid by the mortgage borrower, they take a commission from the lender.
Follow the link below to find out more about the different types of service offered.
Mortgage illustration document
When a lender or an adviser recommends a mortgage, or when a lender gives a mortgage offer, they have to give you a mortgage illustration as part of their offer document which is tailored to your mortgage needs and explains:
- Your monthly repayments
- Any fees or charges you have to pay upfront to get the mortgage
- The overall cost of the mortgage, including interest, over the full term
- The rate of interest or Annual Percentage Rate of Charge (APRC) and the type of interest (i.e. fixed or variable)
- What happens if interest rates rise and how this affects your repayments
- If there are any special features of the mortgage, such as the ability to overpay or underpay
- If you can make overpayments to the mortgage and any penalties for doing so
- What happens if you don’t want the mortgage any more, and
- The length of the reflection period (i.e. at least 7 days, or more depending on the lender).
The offer document should confirm the period for which the offer is valid.
How the mortgage Illustration can help you
The Illustration document d, makes it easy for you to compare the total cost of mortgages side by side because the documents contain the same information, usually presented in the same way.
For example, you can quickly compare monthly repayments, and what happens at the end of any introductory deal.
Of course, you should also read the mortgage offer small print before signing up to any mortgage deal.
Don’t be caught out by charges you weren’t aware of.
Read our guide below to understand more about the different fees and charges that you need to compare.
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