Is a mortgage illustration the same as a mortgage offer?

Mortgage illustration vs mortgage offer: the key differences

A mortgage illustration explains a mortgage you are considering. A mortgage offer confirms that a lender will lend to you on stated terms, so only the offer is a commitment.

Both documents come from rules set by the Financial Conduct Authority (FCA), the UK’s financial regulator. The rest of this guide explains each one in turn, then what happens when the offer does not match the illustration.

Mortgage illustration and offer rules at a glance

The table below pulls together the FCA rules that shape both documents, so you can see when each one should reach you.

What is a mortgage illustration?

A mortgage illustration is a standard document setting out the features and costs of one specific mortgage, based on the details you have given.

Its official name is the European Standardised Information Sheet (ESIS). Many people still use the older name Key Facts Illustration (KFI), which the ESIS replaced for the home loans its rules cover. (Or you could call it a mortgage quote!)

The FCA’s ESIS rules sit in a chapter called MCOB 5A, while the older illustration chapter, MCOB 5, no longer applies to firms covered by them. In practice, lenders and brokers use “illustration” and “ESIS” for the same document, and the standard layout means you can lay two side by side and compare them properly.

A lender’s own guide to the ESIS lists the sections you should expect to see:

• Lender details
• The main features of the loan, including the amount, term and repayment type
• The interest rate and other costs, including the Annual Percentage Rate of Charge (APRC), which lets you compare the overall cost of different mortgages
• How often you pay and how many payments there are
• The amount of each payment, with examples of how it could rise if rates go up
• Any extra obligations, such as insuring the property
• Early repayment charges
• Flexible features, such as overpayment limits

The lender’s guide to the ESIS explains each section in plain terms. Read the cost sections closely, including any mortgage fees, before you go further.

How do you get a mortgage illustration?

You ask a lender or mortgage broker early in your search, and they produce one for a product that suits you. A broker can request illustrations for several products, which makes it easier to compare deals on the same footing.

What information do you need to give?

A lender or broker needs enough detail to price the mortgage accurately, so expect questions about:

• The names and ages of everyone on the application
• Your occupation and income
• The property value and your deposit
• The amount you want to borrow and over what term
• The type of interest rate you prefer, such as fixed or tracker
• Any credit problems, such as missed payments

An illustration is not an application, so it does not commit you to anything. A broker will still ask about your income and credit history, because the answers decide which lenders are worth approaching.

When do you get a mortgage illustration?

Rule MCOB 5A.4 says you must receive the ESIS before you submit a mortgage application. That places it in the early stages of the process:

1. You research products and speak to a broker or lender.
2. They ask about your circumstances and find products that could suit you.
3. You receive illustrations and compare the costs, features and terms.
4. You choose one and move on to the mortgage application process.

What is a mortgage offer?

A mortgage offer is the lender’s formal written promise to lend you a set amount on set terms.

It is issued once the lender has assessed your application and the property. Under the FCA’s rules in MCOB 6A.3, the offer must be binding on the lender. A lender cannot simply walk away because it has changed its mind.

The offer can still carry conditions.

The FCA’s rules allow lawful ones, such as no material change in your circumstances or the property, and knowingly giving incomplete or inaccurate information can also breach a condition. Typical offer conditions also cover practical points, such as proving you have buildings insurance.

An offer states the loan amount, term, product, monthly payment, any fees and the conditions to meet before completion. It must also show, prominently, how long the offer is valid and what happens if you do not go ahead. Read it against your illustration line by line.

How long are you given to think about it?

After a binding offer, lenders must give you a reflection period of at least 7 days, and you can accept at any point. The offer must stay binding on the lender throughout, and you should receive a draft of the agreement at the start of the period.

Take advantage of that time to check the figures and ask your broker anything that is unclear.

How long does a mortgage offer last?

Lenders set the validity period themselves, so it varies between lenders and between types of property.

The date is stated clearly in your offer document, because the FCA requires it to appear prominently. If your purchase could take a long time to complete, such as a new build, ask your broker whether the period suits your timetable.

Our guide explains how long a mortgage offer lasts and what you can do if time runs short.

If the offer expires before you complete, you may need to reapply or ask the lender for an extension. Not every lender agrees to one, and some will want a fresh property valuation or credit check first.

Can a lender withdraw a mortgage offer?

Yes, although it is uncommon. Mortgage offers can be withdrawn if a condition is not met.

The FCA’s rules point to two main triggers: a material change after the offer, or information you knowingly gave that was incomplete or inaccurate.

In practice that can mean:

• A change in your finances. Losing your job, a drop in income or new borrowing can all count, because they affect whether you can afford the loan.
• New credit problems. Missed payments, defaults or County Court Judgments (CCJs) that were not on your file at application can lead the lender to reconsider.
• Inaccurate or false information. If the lender finds that your application was misleading, it can withdraw the offer, so be accurate when applying for a mortgage.
• Property problems. A survey or legal check that finds a serious defect, or a lower valuation, can change the loan-to-value (LTV) ratio the lender relied on.
• Unmet conditions. If you miss a condition within the time allowed, the lender may be entitled to withdraw.

A withdrawn offer is stressful, but the cause is often fixable. Find out exactly why it was withdrawn, speak to your broker, and decide whether to reapply with the lender or look elsewhere.

What happens once you have an offer?

Once the offer is issued, the underwriters have finished their work, and the rest depends on the legal side of the purchase catching up.

You will need to:

1. Check the offer. Compare it with your illustration, confirm the amount, term, product and fees, and raise any queries with your broker.
2. Accept it. This usually means signing and returning the offer, once you are happy with the terms.
3. Tell your conveyancer. Pass the offer to your solicitor or conveyancer, who will work with the lender to meet its conditions and complete the mortgage transaction.

Can a mortgage offer be different from the illustration?

Yes. An illustration is based on the details available when it was produced, while an offer follows the lender’s full assessment, so the two can differ. The FCA’s rules say the offer must come with a fresh ESIS if its terms differ from the earlier one. That lets you see what has changed.

For example, say you want to borrow £500,000 to buy a home priced at £625,000, which is an 80% LTV.

If the lender’s valuer values the property at £600,000, the same loan becomes roughly 83% of the value. That can move you into a different pricing band, so the rate or the fees in the offer may not match your original illustration. Rates also move between the two documents, because lenders change their products regularly, which is another reason to compare both documents line by line.

If something looks wrong, ask your broker or the lender to explain it before you accept. You have at least 7 days to do so.

There is no tidy rule for how big a gap is acceptable. A small rise in cost may be worth taking if your purchase is close to exchange, while a larger one may justify comparing other lenders, although a fresh application can restart the timetable. Your broker can weigh that against your own deadlines.

Mortgage illustration, decision in principle and mortgage offer: what comes first?

A decision in principle, also called an agreement in principle, is a lender’s early indication of what it might lend you. It is not an offer, and it does not replace the illustration.

A typical order looks like this:

1. Decision in principle. A quick indication of what you may be able to borrow, often used to show an estate agent you are serious.
2. Mortgage illustration. The costs and terms of one specific mortgage, provided before you apply.
3. Application. The lender assesses your finances, credit history and the property.
4. Mortgage offer. The binding commitment to lend, subject to its conditions.
5. Completion. The funds are released, and the mortgage starts.

You may not see every step in this exact order, especially if you use a broker, who often sets out the options first.

Do you need both documents?

Yes. The illustration helps you choose a mortgage with the costs in front of you. The offer is the lender’s commitment once it has assessed you and the property.

You cannot really skip either stage, because the rules require the illustration before an application and a binding offer before the loan goes ahead.

What about remortgages?

The same two documents apply when you remortgage or take a moving home mortgage. A lender may not need to visit the property to value it for a remortgage. It will still ask for proof of identity and income before issuing the offer. Our remortgage guide covers the process step by step.

Speak to an independent mortgage broker

Reading an illustration closely takes practice, and a broker can explain the figures and compare them with other deals across the market.

Respect Mortgages is not authorised by the FCA, so we do not arrange mortgages or give advice. If you are ready for the next step, contact a broker through us and we will introduce you to an independent, whole-of-market mortgage broker.