What is a Mortgage in Principle?

A mortgage in principle (MiP), also known as an agreement in principle (AiP) or decision in principle (DiP), is a valuable tool that shows sellers and estate agents you can afford a property. It’s an early step in the homebuying process and can offer a clear indication of your borrowing potential. Let’s explore how securing a mortgage in principle can benefit you.

Understanding a Mortgage in Principle

A mortgage in principle is a document that gives you an estimate of how much a lender might allow you to borrow. It acts as a gauge of your affordability and financial ability to secure a mortgage, making it an important step in house hunting. While not a formal mortgage offer, it gives you a better idea of your budget.

What to consider when getting a Mortgage in Principle

A mortgage in principle is typically valid for 30-90 days, and it’s possible to renew it if it’s about to expire before you make an offer. Although not required when placing an offer, having a mortgage in principle can provide you with greater credibility in the eyes of estate agents and sellers. It also helps you make more informed decisions by knowing what you can realistically afford.

How to get a MiP

You can get a mortgage in principle online, by phone, or through a mortgage adviser. The process is usually quick and free, involving a soft credit check that won’t affect your credit score. During the application, you’ll be asked to provide the following details:

• Personal information (name, address, date of birth)
• Address history for the past three years
• Income details
• Outgoings
• Existing credit agreements

With this information, a mortgage adviser will estimate the amount you could borrow in principle. Note that a MiP is typically provided by a mortgage adviser, while a DiP or AiP comes directly from a lender. You’ll receive an expiry date for the MiP, and if it lapses, you’ll need to reapply.

You won’t need supporting documents for the mortgage in principle application, but they will be necessary when you apply for the full mortgage.

What happens after you get a Mortgage in Principle?

Even with a mortgage in principle, you’ll still need to submit a full mortgage application after your offer is accepted. The lender will then perform more detailed checks on your income, expenses, and overall financial situation. This thorough assessment may result in a different lending amount than what was initially indicated in the MiP.

It’s important to remember that a mortgage in principle is not legally binding, and the final mortgage offer could change depending on the lender’s in-depth evaluation of your finances.

Get expert help

Buying a home involves many steps, especially if it’s your first time. Our advisers are here to guide you through the process, from securing a mortgage in principle to completing your mortgage application. Let us help you make your homebuying journey as smooth as possible. Book an appointment with us today!