Written by: Danny Belton - Head of Lending
A mortgage in principle (MiP), an agreement in principle (AiP), and a decision in principle (DiP) are essentially terms used to describe the same thing: a statement showing that you have the means to afford your mortgage. Here’s everything you need to know to get a mortgage in principle:
In this article:
What is a mortgage in principle?
Understanding a mortgage in principle
How long does a mortgage in principle last?
What’s the difference between a mortgage in principle and an offer?
What to consider when getting a mortgage in principle
What can go wrong with a mortgage in principle?
How do I get a mortgage in principle?
What is a mortgage in principle?
A mortgage in principle is a document that you can give to sellers and estate agents to prove that you can borrow the money you need to buy the house. You can get a mortgage in principle from your mortgage adviser, or by going directly to a lender. They will assess your financial situation and use this information to estimate whether you could afford a mortgage.
Understanding a mortgage in principle
A mortgage in principle is an important step in the homebuying process, and gives you an early indication of how much you may be able to borrow from a lender, essentially proving your affordability.
It can strengthen your position as a buyer when viewing properties as it shows the seller or estate agent that you’re financially reliable and should be given serious consideration as a potential buyer.
For more information about mortgages and some of the terms associated with them, check out this article:
How long does a mortgage in principle last?
A mortgage in principle typically lasts between 60 and 90 days before expiring. This gives you around three months to find the right property for your needs. If you don’t manage to find anywhere within this time, you may need to apply for another mortgage in principle. You may also need to apply for a new one if there has been any change in your circumstances since you applied for your original mortgage in principle.
What’s the difference between a mortgage in principle and a mortgage offer?
A mortgage in principle is not a binding document, but an indication of what you could borrow. Therefore, it is not a guarantee that a lender will definitely lend that amount to you, and they could still potentially refuse you a mortgage.
A mortgage offer, however, is a binding agreement. To get one, your mortgage adviser needs to do a thorough assessment of your finances. They will do this once you have had your offer accepted by the seller. A mortgage offer will give details of how much you are borrowing, the interest rate, mortgage term, and any fees that need to be paid in addition to this.
What to consider when getting a mortgage in principle
There are a few things to be aware of when getting a mortgage in principle:
Deposit
One of our expert mortgage advisers, Rob Brookes, explains, “You don’t need to have a deposit already saved to get a mortgage in principle, but it will give you a clearer idea of what you can afford. That being said, the bigger your deposit, the better your interest rates could be. So keep saving while you’re looking for a property!”
Expiry date
A mortgage in principle is only usually valid for around 30-90 days, so bear in mind that you may have to renew this if it expires before you make an offer.
Credibility
While you don’t need a mortgage in principle to make an offer on a property, it will give you more credibility with estate agents and vendors. They can also help give you direction as to what you can afford so that you can make more realistic decisions about your budget.
What can go wrong with a mortgage in principle?
There’s nothing that can necessarily go wrong with a mortgage in principle, except you may not be provisionally approved for as much as you would like to borrow. In which case, you’ll have to go back and review your finances.
How do I get a mortgage in principle?
You can typically get a mortgage in principle online, over the phone, or by speaking to a mortgage adviser. Applying online will give you a very basic estimate of how much you could borrow, whereas speaking to a mortgage broker will give you a far more accurate idea of what you could afford, as an adviser will look into your financial situation and ask you a few questions, such as the following:
- Personal details like your name, address, and date of birth
- Address history for the last three years
- Information about your income/s
- Information about your outgoings
- Information about existing credit agreements
The adviser will take this information and give you a figure that, ‘in principle,’ is what a lender would be willing to loan to you.
You won’t need any of this information in supporting documents for your mortgage in principle application, but you will when you apply for a full mortgage.
A mortgage in principle is free and the entire process should be relatively quick. Your credit score should not be impacted either, as only a soft credit check will be carried out.
We know buying a home can give you plenty to think about - especially if it’s your first time doing so. Our advisers can help with every step of the process, including helping you secure a mortgage in principle.
What happens after you get a mortgage in principle?
A mortgage in principle is the first step when it comes to buying a home. Once you’ve had an offer accepted on a house, it’s time to apply for your mortgage and get the keys to your dream home!
If you’re buying for the first time, why not download our free guide? In it you’ll find everything you need to know to buy your first home, including handy checklists, information about deposits, and even how to prepare for your moving day.
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Frequently asked questions
No, a mortgage in principle requires only a soft credit check which doesn’t impact your credit score.
Our mortgage advisers will only issue one mortgage in principle. You could get a different mortgage in principle from each lender, however you’d have to resubmit your details individually for each one.
A mortgage in principle is free of charge for everyone.
To get a mortgage in principle, you’ll need to give evidence of: your ID, 3-6 months of payslips, three years’ address history, last three months of bank statements, and evidence of other outgoings and credit arrangements.
No, you don’t need a mortgage in principle to view a house, but it can help give you the confidence to view a house knowing that you can afford the asking price. It can also make you a more attractive buyer as the vendor can trust that you can afford it, whereas a potential buyer without a mortgage in principle is more risky.
Yes, you can get a mortgage in principle whether you’re a first time buyer or you’ve bought before.
Important information
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.
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