A mortgage in principle serves a couple of benefits.
- It gives you a clear indication, without a full application, as to what you could borrow and whether a certain lender would lend to you. This saves you getting in too deep with viewings or too far down the process with properties if you won’t be able to raise the funds to complete a purchase
- Some estate agents request a mortgage agreement in principle before even allowing people to view properties for sale. This indicates a serious buyer and helps them to cut down on time wasters
But what exactly is a mortgage agreement in principle, how do you get one and where should you get one from?
What is a mortgage agreement in principle?
A mortgage in principle is also referred to as:
- An Agreement in Principle (AIP)
- A Decision in Principle (DIP)
They’re the same thing. Essentially, they are a provisional agreement to lend based on a preliminary assessment of a number of things including:
- Credit score
- Income
- Outgoings
It is not a final offer to lend, rather just an initial indication, based on the information you give, about whether you could borrow.
Some lenders will ask you to specify how much you want to borrow and what deposit you have, then give a simple yes or no. Others will ask you for your information and then tell you, in principle, an amount you would be likely to be able to borrow up to (a maximum amount).
You could argue the latter is more useful, as this gives you an indication as to what budget you need to work towards.
Remember: a mortgage in principle does not guarantee you would be successful in a full mortgage application. However, the more accurate the information you provide on an agreement in principle application, the likelier it is that you would ultimately be approved later. But successful full applications also depend on things like the house itself etc.
How do you get a mortgage in principle?
You can get a Mortgage in Principle by applying directly to a lender. Lenders have their own forms and some of them are found below.
Later on, you my choose to go through a broker, of course. But in the interest of efficiency, going directly for an AIP to a lender often means quick decisions.
Here’s where you’ll find forms for various lenders:
- Halifax Mortgage in Principle application form
- Nationwide Mortgage in Principle
- HSBC Mortgage in Principle form
- Barclays Mortgage in Principle form
- Santander Mortgage in Principle form
To find the forms for any other lender, simply Google the lender’s name plus “mortgage in principle.”
What you’ll need to get an Agreement in Principle
When you fill the form in, be sure to have all of the following for all applicants:
- 3 years of address information
- Income information
- Outgoings information. The forms often specifically ask for monthly loan repayments, credit card balance and similar
Does an AIP guarantee a mortgage?
No. This is a provisional agreement.
Can I change lender after a mortgage in principle?
Yes. A mortgage agreement in principle does not commit you to anything. You are not obligated to then continue to a full application with that lender.
