Get a Mortgage in Principle

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 an estimate of how large a mortgage you can borrow to fund a property purchase. They are provided by lenders, such as banks or building societies, based on factors such as your income, credit score and how much you have saved for a deposit.

As such, they are a useful tool for when you first start looking at properties to buy, as it can give you a clear indication of how much you can borrow. From there you can narrow down your property search based on the budget allocated by your mortgage in principle.

How long does a mortgage in principle last?

Your agreement in principle will normally last from around 60 – 90 days. After that, the deal will expire, and you will have to apply again. It’s a good idea to start looking at properties and making enquiries as soon as possible once you have your agreement in principle, as buyers that move fast are more appealing to property sellers, and you lessen the risk of having to apply for a new mortgage in principle.

How can I get a mortgage in principle?

You can reach out to lenders directly to get an agreement in principle, but their decision isn’t necessarily the best offer you can get. For access to a wider variety of deals and potentially an agreement in principle that can offer the property budget you have in mind, reach out to a mortgage adviser, who will have access to a variety of lenders and deals, and be able to provide a mortgage in principle that works for your circumstances.

What documents are required for a mortgage in principle?

To accurately determine what you might be able to borrow, your mortgage adviser will need several documents to determine what financial position you are in.

These can include:

• Your legal name and date of birth
• Your National Insurance (NI) Number
• Your address history from the last 3 years
• Proof of your current address
• ID, such as a passport or driver’s licence
• Income information: salary, bonuses, payslips and bank statements
• Business accounts (if self employed)
• Any outgoings or debts: credit cards, loans
• Monthly expenses: travel costs, childcare, bills, school fees
• Deposit amount

Does a mortgage in principle affect my credit score?

Most of the time, a lender will perform a “soft” credit check when organising your agreement in principle. These don’t affect your credit score. However, very rarely a lender will perform a “hard” credit check, which does affect your credit score.

Make sure you confirm with your lender or mortgage adviser what kind of credit check will be performed for your mortgage in principle.

Can I get a mortgage in principle with bad credit?

Most of the time, yes, providing you use a lender that specialises in this sort of mortgage. These mortgages tend to have stricter criteria and may also have higher interest rates, require a larger deposit and offer less borrowing power than if you have a stronger credit score.

Remember that your MIP is based on your lender’s evaluation of what you may be able to pay back. A higher credit score means, on paper, that you are riskier to lend to, but it doesn’t make getting a mortgage impossible!

Using a specialist mortgage adviser like Wiser Mortgage Advice is a good way of finding the right lender who gives you a mortgage, even if you have adverse credit.

Should I get a mortgage in principle before looking for a property?

This is highly advised, as not only will you have a better understanding of what properties you can afford, but it shows you are a serious buyer to sellers and estate agents, meaning they are more likely to take your offer seriously and get the ball rolling on your purchase.

Make sure you have plenty of time to look for a property once you receive your MIP, as if it expires, you’ll need to start the process again.

What happens if my mortgage in principle expires?

If you go past the date of expiry for your mortgage in principle, you will need to reach out to your prospective lender to have a new agreement created. Be aware that this agreement may differ slightly than your last, especially if your financial situation has changed in any way.