What is a mortgage in principle?

A mortgage in principle, or mortgage agreement in principle or decision in principle, is an official agreement by a bank or building society that – pending a full mortgage application – they will lend you a certain amount of money to buy a property.

What does agreement in principle (AiP) mean?

An agreement in principle is a confirmation by a bank or building society of the amount of money that they will be prepared to lend you for your mortgage, based on the information you have provided. Applicants will need to give details of their income, spending and any debts they have.

With an AiP, you have a realistic idea of the type of property that you will be able to afford. It does not guarantee a mortgage offer, because lenders will still need to run a full credit check when you apply for a mortgage.

What do you need for a mortgage in principle?

To apply for an agreement in principle you will need to provide the following information:

• Addresses for the previous three years
• Details of your income, including salary, bonuses, benefits, pensions or investments
• Evidence of debts, such as credit cards, outstanding finance agreements and loans
• Your outgoings and expenditure, like childcare, school fees and utility bills

How do I apply for a decision in principle?

Most lenders will have an online process where you can enter the required information, and they will run a soft credit check while you wait. You will normally get a confirmation within a few minutes of your AiP, based on the information you have provided.

How long does a mortgage in principle last?

An AiP will be valid for 90 days, during which time you can apply for a mortgage with the lender that confirmed the AiP. However, if any of your circumstances relating to your income, spending or debts change within that time, you will need to apply for a new mortgage in principle.

What credit checks are done?

A soft credit check will usually be run. In practice this means that the lender will check that the information you have provided in the AiP application matches those that credit reference agencies hold on file about you. You don’t need to worry about soft searches affecting your credit score. A soft credit check does not affect your credit rating. A full credit check will only be undertaken when you apply for a mortgage.

What happens after an AiP is agreed?

A mortgage in principle is not essential, but if you are a first time buyer it will prove to a seller that you can afford to buy a property. You can also make an offer quickly knowing that a lender has confirmed that they would be willing to make you a mortgage offer, pending a full mortgage application.

Buy to let mortgage in principle

A Buy to Let mortgage in principle is essentially the same as a normal AiP, but will assess your ability to afford a mortgage as a landlord. As part of the application you will have to include details of your income and outgoings, plus the amount of rental income you expect to receive.

Shared ownership mortgage in principle

If you are considering buying a shared ownership property, you can get a shared ownership AiP. A housing association may ask for evidence that you have a mortgage agreement in principle. You will need to provide details of the rent and any service charges of the shared ownership property when you apply for your AiP.

Let us help you find your perfect property

An agreement in principle is one of the first steps on the road to buying a property. Contact haart today to discuss your options.