When a mortgage advisor or lender recommends a mortgage to you, they will give you a Key Facts Illustration or European Standardised Information Sheet. They are commonly referred to as a "KFI".
These documents include all the “key facts” about the mortgage deal and are tailored to your personal situation and needs, such as the amount of money you’re wanting to borrow, the length of the mortgage, and the mortgage deal your advisor has recommended.
What information is included in a KFI?
A KFI will show the name of the mortgage applicant(s), the date it was produced on, and how long it is valid for.
A KFI will normally also include the following sections:
About this illustration
This section explains how the Financial Conduct Authority (FCA) requires mortgage advisors to provide you with a mortgage illustration to help you compare the different mortgage products available to you.
Which services you are being provided with
This part confirms whether or not the advisor has recommended a mortgage product to you or just given you information
The details you have provided
This includes the:
loan amount
repayment method
mortgage term
value of the property
loan-to-value (LTV) of your mortgage
Description of the mortgage
This includes the:
loan amount
initial rate payable
product description
method of repayment
term of the loan
It also includes details on the rate payable after any fixed period ends (the lender’s standard variable rate or SVR).
Overall cost of the mortgage
This shows how much you’ll repay to the lender in total and how much you’ll be paying back for every pound borrowed.
What you will be paying each month
This shows the monthly payment figure during the fixed period, and the monthly payments after the fixed period ends.
An outline of the risks involved in mortgages
This looks at the effect of interest rates rising, reminding you that you’ll still need to pay your mortgage even if your income falls.
The fees you must pay
These might include:
Arrangement fee
Valuation fee
Broker fee
Legal fee
Funds transfer fee
Insurance
This includes any details of insurances you need to take out to be eligible for the mortgage recommended, such as buildings insurance.
What happens if you no longer want the mortgage
This details the early repayment charges (ERCs) on the mortgage.
What happens if you wish 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 potential 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.
However, most people will remortgage at some point, rather than stick with one mortgage product for the entire term.
Other borrower rights
Fore example, how long you have to consider a binding mortgage offer.
Using a mortgage intermediary
This details the possible commission fee the lender will pay your broker if you take out the mortgage
Where you can find additional information about mortgages
This directs borrowers to the Money Advice Service’s guides on choosing a mortgage.
So, why should you read your KFI?
A KFI should make it easy for you to see and compare the terms and costs of the mortgage. You should read the KFI carefully and ensure that you fully understand it before you apply for a mortgage. After all, a mortgage will probably be the biggest financial commitment you will ever make.
If there is anything you are unsure about in your KFI, make sure you speak to your advisor about it.
