The ESIS illustration: what it must show

A mortgage illustration, officially called a European Standardised Information Sheet or ESIS, is the document a lender must give you before you take out a mortgage. It is a pre-contractual disclosure document, which means it arrives before you commit rather than after¹. Its purpose is to put the same headings, in the same order, in front of every borrower, so that two lenders' documents can be read side by side.

The ESIS sets out the value, currency, term, repayment type, the nature of the mortgage product, the total amount to be repaid by the borrower and the maximum loan amount available². It also carries a validity statement naming a date, and warns that after that date the information may change in line with market conditions, apart from the interest rate and other costs³.

What it is not is a mortgage offer. Small variances may occur because of rounding, and the formal mortgage offer from the lender contains the fully accurate figures and forms the binding mortgage contract². An illustration is not a commitment to lend⁴.

What an ESIS is and when a lender must give you one

The ESIS is the document behind the phrase "mortgage illustration". Lenders describe it as a pre-contractual disclosure document which must be given to you prior to taking a mortgage¹. Building societies use the same term when they explain that all lenders are obliged to provide it⁵.

Timing varies by lender and by route. One lender says the ESIS is issued once you have applied for your mortgage, containing full information about what happens at the end of the fixed rate mortgage⁶. Another says all borrowers will be issued with an ESIS before they sign up to their mortgage, outlining the deal terms and what happens at the end of the discounted rate term⁷. A third describes giving a mortgage illustration for any product you are interested in, showing monthly costs and the total amount repayable⁸. If you are switching deal with your existing lender, you receive what is called an ESIS for the switch⁹.

There is a separate rule for rate switches. Before an application to change all or part of a regulated mortgage contract from one interest rate to another, the firm must provide the customer with either an illustration for the whole loan complying with MCOB 5, or an ESIS for the whole loan complying with MCOB 5A, unless it has already been provided¹⁰.

For self-build and other tranched lending, where the loan is released in instalments, the rules allow a binding offer, an ESIS and a reflection period for the full amount, or for an initial amount replaced by later offers as the amounts grow¹¹.

The sections of an ESIS: rate, term, costs and total repayable

The regulatory annex lists 15 numbered sections: Lender; Credit intermediary; Main features of the loan; Interest rate and other costs; Frequency and number of payments; Amount of each instalment; Illustrative repayment table; Additional obligations; Early repayment; Flexible features; Other rights of the borrower; Complaints; Non-compliance with the commitments linked to the loan; Additional information; Supervisor³. A lender's own guide describes the same document as structured into 13 standard sections, each designed to explain a different part of the mortgage².

The main features section is where the shape of the loan sits: the value, currency, term, repayment type, nature of the product, the total amount to be repaid and the maximum loan amount available². The illustrative repayment table shows what the instalments look like over the term. For context on how a term drives the numbers, the Bank of England's own worked example uses a £130,000 mortgage paid off over 25 years¹².

The costs a borrower needs to weigh are the monthly repayment amount, any fees including to set up or change the deal, the term of the loan and changes to interest rates¹³. Those sit alongside the ongoing costs of owning: paying the mortgage, rates, repairs and service charges¹⁴.

The ESIS also states your right to repay early: "You have the possibility (the right to) to repay this loan early, either fully or partially."³

Fees and charges shown on the illustration

The ESIS is where the fees live, and it is the reason a repayment calculator is not a substitute for it. One lender states plainly that repayment indications do not include any fees that may be payable, and that an illustration outlining all the relevant costs is available on request¹⁵. Another describes providing a Mortgage Illustration (ESIS) detailing all associated costs before you commit¹⁶.

Product fees vary by deal and by lender. One lender's answer to what the product fee is: "This will vary. Please refer to your mortgage illustration."¹⁷ A representative example from a specialist lender shows arrangement fees of £3,400¹⁸. The point is not the size of any one fee but that the ESIS is the document that names it for your case.

Two cautions apply to figures of this kind. Illustrations built on assumed growth rates are not reliable indicators of future performance, which is how one provider describes the illustrations in its costs and charges disclosure document¹⁹. And an illustration is not a commitment to lend⁴.

Where a mortgage is offset, the illustration may show the balance that interest is charged on rather than the headline loan. One offset example gives that balance as £85,000²⁰.

Fixed rate ending: what the ESIS says happens next

This is the part of the ESIS borrowers most often skim, and the part that matters most. The document gives full details about your mortgage deal and outlines what happens at the end of the set product period²¹.

What happens is usually a move to a different rate. One lender says that at the end of the initial period you move on to a different rate, often its standard variable rate²². Another says that when your fixed rate deal finishes, the rate of interest can increase²³. A third names the destination: if your fixed deal is coming to an end, you move on to its Standard or Base rate mortgage¹⁴.

Standard variable rates are usually higher than a fixed rate deal²⁴, and the interest rates are often higher for SVRs than for other types of mortgages²⁵. That is why the rate on your ESIS can look higher than the fixed rate you chose: the document has to show both the initial rate and what follows it.

The exit charge section sits alongside this. The ESIS must show the fee applicable and whether and how it changes during the product term². An early repayment charge is a charge levied by the mortgage lender on the customer if the amount of the loan is repaid in full or in part before a date or event specified in the contract²⁶. The actual fee varies by product and is detailed in the illustration²⁷.

The Financial Ombudsman Service has published a case study in which a borrower faced a £1,500 early repayment charge that had not been taken into account²⁸. That is the kind of surprise the ESIS exists to prevent.

Reading the APRC and the representative example

The APRC, the annual percentage rate of charge, is the figure that folds the rate and the charges into one number so that deals can be compared. Each mortgage product carries a representative example demonstrating the total amount of credit, the total cost of credit, the total amount payable and the APRC²⁹.

A representative example is not a quote for you. One lender describes its representative example as designed to show an overall rate that at least 51% of its customers are paying for their mortgage³⁰. One lender's representative example mortgage (Scenario A, also used for scenarios B and C) carries an APRC of 8.08%³¹. Another representative example is payable over 25 years³².

The APRC is worth reading next to the rate, not instead of it, because it reflects the charges as well as the interest. Our page on how the APRC is worked out and what it includes goes through the calculation.

Where an ESIS is not a mortgage offer

Three documents get confused, and the differences matter.

An ESIS is a pre-contractual disclosure document given before you commit¹. It is not a commitment to lend⁴. Small variances may occur due to rounding, and the formal mortgage offer from the lender contains the fully accurate figures and forms the binding mortgage contract².

An agreement in principle is a different thing again: it is not a mortgage offer or an official confirmation that you have a mortgage³³. Our page on mortgage in principle explains what it does and does not do.

A mortgage offer is the binding document. If a binding offer is made whose characteristics differ from the information in the ESIS previously provided, that offer must be accompanied by an ESIS¹¹.

If the ESIS does not match what a broker told you, raise it before signing. A mortgage intermediary must take reasonable steps to ensure that an illustration it issues, or which is issued on its behalf, other than one provided by a mortgage lender, is accurate³⁴. We are not recommending a particular mortgage for you. However, based on your answers to some questions, we are giving you information about this mortgage so that you can make your own choice.)"³