What is a Mortgage in Principle?

Table of Contents

How do you get a mortgage in principle?
What do you need for a mortgage in principle?
Does getting a mortgage in principle affect your credit score?
Why should you get a mortgage in principle?
When should you get a mortgage in principle?
How long does a mortgage in principle last?
What happens after you get a mortgage in principle?
Can a mortgage in principle be declined?
What’s the difference between a mortgage in principle and a mortgage offer? 
Do I have to use the same lender for my mortgage?

A mortgage in principle is an indication from a lender of how much you may be able to borrow for a mortgage. It is sometimes called an agreement in principle (AiP), a decision in principle (DiP), or a mortgage promise. You can get a mortgage in principle if you’re a first-time buyer, thinking about moving home or looking to remortgage.

Getting a mortgage in principle doesn’t guarantee the lender will offer you a mortgage or the amount indicated. This is only decided once you’ve made a formal mortgage application.

However, it can give you an idea of the home you can afford and it should reassure sellers and estate agents that you will be able to get the mortgage finance you need.

How do you get a mortgage in principle?

You can get a mortgage in principle directly from a lender or through a mortgage broker.

Depending on the lender, you could apply for a mortgage in principle online, over the phone or at a branch. It may be possible to get an online decision in a matter of minutes. Getting a mortgage decision in principle is usually free, but it’s always worth checking in case a fee is payable.

» COMPARE: Best mortgage lenders

What do you need for a mortgage in principle?

The information you need to apply for a mortgage in principle may differ slightly between lenders, but generally you should be prepared to share details such as:

Your name and date of birth.
The addresses you’ve lived at in the past three years.
Your income.
Your expenditure.
Any existing loans you may have.

You shouldn’t need to provide supporting evidence when getting a decision in principle, but it will be required if you decide to proceed with a proper mortgage application.

Does getting a mortgage in principle affect your credit score?

Many lenders are willing to provide a mortgage in principle based on a soft credit check, which shouldn’t affect your credit score. However, if a lender uses a hard credit check it will show on your credit history. Your credit score could be harmed if you make several mortgage in principle requests close together and the lenders use hard credit checks. It’s best to check with a lender what type of credit check it will use.

Can you get a mortgage in principle with bad credit?

It is possible to get a mortgage in principle, and a mortgage itself, if you have bad credit, but you may have fewer deals to choose from and might face higher mortgage rates.

Why should you get a mortgage in principle?

Getting a mortgage in principle can reassure you that you’re able to get a mortgage and gives you an idea of the amount you may be able to borrow. This can be important whether you’re buying for the first time, moving home or remortgaging. It may also make the full mortgage application process quicker and easier because you’ve already shared some information with the lender.

Having a decision in principle in place will also help you when making an offer on a property. First, just having one shows that you are serious about buying a home, rather than merely dipping your toe in the water to get a feel for the state of the market. Second, it gives credibility to any offers you make on a property, because the seller will have some confidence that you can afford the property.

Both these factors can make you a more attractive buyer and improve your chances of having a bid accepted. That said, it’s important to remember that it is an agreement to lend to you in principle. It isn’t a guarantee that when you make a full mortgage application you will be approved.

» MORE: How much house can I afford?

When should you get a mortgage in principle?

If you’re thinking of buying a property and not sure how big a mortgage you can get, getting a decision in principle early in the process can give you an idea of the properties you can afford. It’s also a good idea to have an agreement in hand if you’re looking at properties with a real intention to buy. This will give sellers confidence you’re financially capable of buying and have thought about the crucial step of getting a mortgage.

If you’re remortgaging, an early agreement can be reassuring. You can be confident that you’ll be able to switch to a new deal in good time before your current deal ends.

» COMPARE: Remortgage deals

How long does a mortgage in principle last?

This can vary depending on the lender, but often a mortgage in principle will be valid for 60 to 90 days. If you still haven’t found the right property after this point you may need to renew it or get another one. This should be relatively easy as long as your situation hasn’t changed drastically.

If your circumstances do change after you’ve received a decision in principle, it’s worth checking with your lender if it’s still valid or should be renewed.

What happens after you get a mortgage in principle?

If you have a mortgage in principle and find a property you’d like to buy you’ll have an idea of the highest price you can afford. Should you have an offer to buy a property accepted, the next step is to make a full application for a mortgage. The lender will assess your application and, if approved, make you a formal mortgage offer, officially confirming the mortgage you are allowed and on what terms for that particular property. The terms could be different to the agreement in principle you received, and it may be that you’re not offered a mortgage at all.

Importantly, receiving a mortgage in principle doesn’t commit you to having to apply for a mortgage if you don’t want to.

Can a mortgage in principle be declined?

A lender could decline your application for a mortgage in principle if it doesn’t think you’d qualify for one of its mortgages. This may be because your income is too low, your deposit is too small or the lender has concern over your credit history. However, because eligibility criteria differ between lenders, it’s still possible you could get a mortgage in principle elsewhere.

What’s the difference between a mortgage in principle and a mortgage offer? 

A mortgage offer is formal confirmation from a lender that it will give you a certain mortgage for a specific property, whereas a mortgage in principle is essentially an initial estimate of the amount it may be willing to let you borrow.

Do I have to use the same lender for my mortgage?

There is no obligation to use the lender that gave you a mortgage in principle when the time comes to apply for a mortgage.

You can search the market again to determine which mortgage best meets your needs. Don’t be afraid to apply for a mortgage with a different lender if you are confident you meet its lending criteria.

» MORE: See current mortgage rates

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