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.
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.