What is a mortgage in principle?
mortgage guide

A Guide To Getting A Mortgage In Principle

One of the first things to do when you start looking for a house to buy, is to look into mortgages. You will need to know the different mortgages types available to you and also how much you will be able to borrow. You can get a mortgage in principle whilst you carry out your property search, to ascertain how much a lender is willing to loan you. Once you find the right property and have an offer accepted, you can go on to make a full mortgage application.

A mortgage in principle, an agreement in principle (AIP) and a decision in principle are different terms used to mean the same thing. It is a statement from a lender confirming that they are willing to lend you an amount based on certain criteria. It is undertaken by a lender prior to a full mortgage application being made and allows the lender to look into your credentials to see if they are happy to lend to you. Typically the mortgage in principle process involves the lender running a credit search against your profile as well as performing basic affordability checks.

You can submit an application for a mortgage in principle at any point during the house buying process and is useful to have it ready to prove to an estate agent or a house vendor that you are indeed a serious buyer with the means to complete the sale.

  • It offers you peace of mind to know that you are likely to get a mortgage on application. This could particularly be useful if you have a limited credit history and aren’t sure whether a lender is likely to lend to you.

  • Your offer on a property is likely to be more favourable against other buyers if you already have a mortgage in principle to show the estate agent or vendor.

  • A mortgage in principle doesn't give a guarantee about the amount the lender will eventually lend you so you could end up with a different decision once your full mortgage application is reviewed.

  • It requires a credit search so it could have a detrimental impact on your credit score.

  • If there is a gap between getting a mortgage in principle and going on to make the full application, lender’s rates could have changed and you find a different lender is now offering the better deal.

Typically, a mortgage in principle will be valid for between 60 and 90 days. You can then reapply if you still need it, but be aware that too many mortgage in principle requests could damage your credit score.

If you need help to decide whether to get a mortgage in principle, or maybe you definitely want to go ahead and apply for one, speak to one of expert advisers who will be happy to help you. If you initially want to find out how much you are likely to be able to borrow, click here to use our easy to use calculator.

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