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What is a Mortgage in Principle?

Mortgage in Principles can be the first step toward buying a home. So we talk you through what a mortgage in principle is — and how you get one — in our handy guide.

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What is a Mortgage in Principle?

When you’re looking to move home — whether you’re a first-time buyer or moving to a new place — one of the first things you’ll run into is getting your mortgage in principle. Now, if it’s your first time, getting a mortgage can feel a little overwhelming, and there’s a good chance you’ve never even heard of a mortgage in principle before you started looking to buy a home. So what is a mortgage in principle and why do you need one?

First things first: A mortgage in principle (MIP) — also called an agreement in principle (AIP) or a decision in principle (DIP) — isn’t as scary as it sounds. In fact, it’s exactly what it sounds like. A mortgage in principle is when a lender decides, in principle, to give you a mortgage. See what they did there?

So, they’re basically saying “in theory, we will lend you £X amount”. But it’s different from the actual mortgage you will get later on, once you’ve found the property you want to buy. 

So do you need a mortgage in principle? And why would you get a mortgage in principle if it’s not the actual loan? Well, it’s a lot about putting yourself in the best position to go out into the world as a buyer. We’ll talk you through it.

How does a mortgage in principle work?

Right, so as we said the mortgage in principle is when a lender (normally a bank) agrees to lend you a certain amount, in principle. So they take a look at your finances, your credit score, your income, your savings, and they say: This is, in theory, how much we will lend you to buy a property. They may call it a decision in principle or an agreement in principle, but it works exactly the same way. 

So how do you get one? You go either directly to a lender (normally a bank) and apply, or you go to a mortgage broker, who will look at lots of different mortgages on offer with lots of different lenders and find the best deal between all of them. If you go with a mortgage broker, you’ll give them your documents and financial information, then they’ll make the application for you. If you go directly to a lender, you’ll do the application yourself.

Why do you need a mortgage in principle?

Mortgages in principle are important for a few reasons. Firstly, as a buyer, it lets you know exactly how much you can afford. So you’ve worked out how much you can borrow and how much you have for a deposit, and you can look for homes that fall within that range — and know exactly how much you can offer. It’s a lot easier than starting the process, falling in love with your dream home, and realising you can’t afford it. 

But the other reason you need a mortgage in principle has more to do with the sellers. Some sellers will only consider buyers who already have a mortgage in principle agreed. In fact, some estate agents won’t book you in for viewings unless you have one — especially if the market is busy. So getting a mortgage in principle is normally key for your property search and shows you are a serious buyer.

What do I need for a mortgage in principle?

Great question. So getting a mortgage in principle normally involves sharing some information about you and your finances — but you won’t need as many details as when you apply for the full mortgage. It may vary a little from lender to lender, but normally you’ll need: 

  • Personal information and your address history: Name, date of birth, where you’ve lived before.

  • Information about your income: Your monthly income (combined household income if you’re applying with someone else) and any other regular income you have.

  • Information about your outgoings: Bills, credit cards, loans — this all helps to get a sense of your finances and what you can afford.

As we mentioned, getting a mortgage in principle (or an agreement in principle, decision in principle, whatever you want to call it) isn’t as in-depth as when you apply for the mortgage. Your lender may not ask for actual pay statements and they may only run a soft credit check. (Though some lenders to run a hard check — and that can affect your credit — so always be sure to ask or have your mortgage broker talk you through it.)

How quickly can you get a mortgage in principle?

In some cases, very quickly. If you just get a mortgage principle online, many sites can provide one almost instantly. Sometimes it will take longer, if the lender you apply to has any questions or sets a higher bar for getting a mortgage in principle. 

No matter how you get one, they should be free and, in some cases, you may have one in just a few minutes.

How long does a mortgage in principle last?

OK, so if a mortgage in principle isn’t the actual mortgage, you might wonder how long the agreement in principle actually lasts. It’s really important information — because if you’re out there house hunting, it gives you a sense of how long you have to find the right home. The length of a mortgage in principle is normally between 60 and 90 days, though some can be as short as 30 days, so always talk to your mortgage lender or your broker if you’re not sure. This is the amount of time you have to find the actual property you want to buy and submit a mortgage application. Because your lender has already agreed in principle, it should just be a question of supplying the proper paperwork and giving them information about the home. In some cases, they may want to have a valuation done of the home you're buying, to make sure it’s really worth what you’re paying for it.

So, if your decision in principle only lasts 60 days or 90 days, what do you do if your mortgage in principle expires? Well, in some cases you can extend or renew the agreement to give you time to find your dream home. But if the market or interest rates have changed significantly since you first agreed your mortgage in principle, your lender may make you apply for a new one.

What can go wrong with a mortgage in principle?

Normally getting a mortgage in principle is a straightforward process, but there are a few hiccups that can happen along the way. The most obvious thing that can go wrong is if you’re rejected for a mortgage in principle. That could happen for a few different reasons, but normally it’s something like: 

  • Mistakes on the application

  • Not having enough income — or income that isn’t reliable enough

  • Having bad credit

  • Having too much other debt

  • You’ve changed jobs too recently — or too frequently 

  • Not having a big enough deposit

Getting rejected from a mortgage in principle can affect your credit, so it’s good to keep that risk in mind. That being said, this is where a mortgage broker can really shine

Should you use a mortgage broker to get a MIP?

If you’re worried about being rejected — or just want to maximise your borrowing — a broker can be incredibly useful when you’re getting a mortgage in principle. They’ll go through the application to make sure there are no mistakes, but they’re also in a good position to tell you whether or not you’re likely to be approved — so they can potentially save you the stress of a rejection. It’s their job to guide you through this process and make sure you’re a strong candidate, so it can help to lean on their expertise. Of course, if you aren’t transparent when you get your mortgage in principle, you could later be rejected for a mortgage — so it’s crucial that you’re honest and disclose everything, right from the beginning.

Although rejections happen, getting a mortgage in principle is normally a very straightforward process. As long as you have a reliable income and a deposit, you can often be approved for a mortgage in principle within just a few minutes. Just remember to be transparent, don’t be afraid to ask questions, and that there are experts out there to guide you along the way. Then you can start house-hunting with plenty of confidence — and you’ll be ready to make an offer as soon as you find your dream home. 

Mortgage in Principle FAQs

It’s an initial agreement — a lender is, in principle, offering you a mortgage of a certain amount. This lets you know how much you’re likely able to borrow so you can start your search for a new home. You’ll complete the actual mortgage application once you’ve found the property.