How to read a key facts illustration
When a lender or mortgage adviser recommends a mortgage, they must give you a key facts illustration (KFI) document.
As the name suggests, this document gives you the “key facts” about a mortgage deal.
A KFI is tailored to your personal situation, the amount of money you want to borrow, and the mortgage deal your adviser has recommended.
What information does a KFI include?
A KFI shows the name of the mortgage applicant or applicants, the date it was produced and how long it’s valid for.
It normally has the following sections (or similar):
About this illustration
This section explains that the Financial Conduct Authority (FCA) requires mortgage advisers to give you a mortgage illustration to help you compare different mortgage products.
Which service are we providing you with
This part confirms whether the adviser has recommended a mortgage product or just given you information.
What you have told us
This includes:
loan amount
repayment method
term of the mortgage
value of the property
loan-to-value (LTV) of your mortgage
Description of this mortgage
This includes:
loan amount
initial rate payable
product description (for example, a fixed rate of 2% until November 2021)
repayment method
term of the loan
It also details the rate payable after any fixed period ends (the lender’s standard variable rate or SVR).
Overall cost of this mortgage
This shows how much you’ll repay the lender in total, and calculates how much you’ll pay back for every pound borrowed. For example, £1.20 for every £1 borrowed.
What you will need to pay each month
This shows the monthly payment during the fixed period (24 payments of £600, for example) and the monthly payments after the fixed period ends (276 payments of £750, for example).
Are you comfortable with the risks?
This looks at the effect of interest rates rising, and reminds you that you still need to pay your mortgage if your income falls.
What fees must you pay
These might include:
arrangement fee
valuation fee
broker fee
legal fee
funds transfer fee
Insurance
This includes details of any insurance you need to take out to be eligible for the mortgage, such as buildings insurance.
What happens if you do not want this mortgage anymore
This details the early repayment charges (ERCs) on the mortgage.
What happens if you want to make overpayments
Some mortgages allow overpayments up to a certain percentage of the loan to be made before ERCs kick in.
Additional features
This includes any incentives, such as free legal fees.
Interest rates and other costs
This is the Annual Percentage Rate of Charge (APRC).
The APRC is the total cost of the mortgage expressed as an annual percentage. It shows the total cost of the mortgage, including fees, over the term ( 25 years, for example).
However, most people will remortgage at some point rather than stick with one mortgage for the entire term.
Other rights of the borrower
For example, how long you have to consider a binding mortgage offer.
Using a mortgage intermediary
This details the commission fee the lender will pay your broker if you take out the mortgage.
Where can you get more information about mortgages
This directs borrowers to the Money Advice Service’s guides on choosing a mortgage.
Why should you read your KFI?
A KFI should make it easy for you to see the costs and terms of the mortgage, and to compare them with other mortgages.
You should read the KFI carefully and fully understand it before you apply for your mortgage. After all, a mortgage will probably be your biggest financial commitment.
Speak to your adviser if there’s anything you’re not sure about in your KFI.
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