What is a mortgage in principle?

A mortgage in principle (MiP), an agreement in principle (AiP), and a decision in principle (DiP) are essentially terms used to describe the same thing. As a great way to show lenders that you have the means to afford your mortgage, let’s take a look at what the process for getting a mortgage in principle entails in more detail.

Understanding a mortgage in principle

A mortgage in principle is an important step in the homebuying process, giving you an indication of how much you may be able to borrow from a lender. This document acts as an indication of your affordability, giving you an idea of your financial ability to secure a mortgage.

For more information about mortgages and some of the other terms associated with them, check out this article.

What to consider when getting a mortgage in principle

A mortgage in principle is only usually valid for around 30-90 days, and you can renew this if it’s going to expire before you make an offer.

While you don’t need a MiP to make an offer on a property, it will give you more credibility with estate agents and vendors. They can also give you direction as to what you can afford, meaning you can make more realistic decisions about your budget.

How to get a mortgage in principle

You can typically get a mortgage in principle online, over the phone, or by speaking to an adviser. They should be free and the entire process should be relatively quick and painless. As only soft credit checks will be carried out, your credit score should not be impacted.

During your application, you’ll be asked a few things:

Personal details like your name, address, and date of birth
Address history for the last three years
Information about your income/s
Information about your outgoings
Information about existing credit agreements

The adviser will take this information and give you a figure that, ‘in principle,’ is what a lender would be willing to loan to you. A mortgage in principle is provided by the adviser, while a decision in principle or agreement in principle would be issued by the lender. You’ll have an expiry date, meaning you’ll need to apply for a new mortgage in principle past this point.

You won’t need any of this information in supporting documents for your mortgage in principle application, but you will when you apply for a full mortgage.

What happens after you get a mortgage in principle?

Remember, even if you put an offer in with a mortgage in principle and it’s accepted, you’ll still need to go through a formal mortgage application to proceed with your homebuying journey.

While getting a mortgage in principle gives an initial indication of your eligibility for a mortgage, it’s not a guarantee. Once your mortgage application has been submitted, the lender will carry out their standard checks on your income and expenses, as this could affect your ability to meet your mortgage repayments. They will then assess your eligibility against a range of criteria, which may change the lending amount that you are offered.

You should also note that a mortgage in principle is not legally binding, and following a more thorough assessment of your finances, the amount could change.

We know buying a home can give you plenty to think about - especially if it’s your first time doing so. Our advisers can help with every step of the process, including helping you secure a mortgage in principle.

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Important information

Your home may be repossessed if you do not keep up repayments on your mortgage.

There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.