What is a Mortgage in Principle?
A Mortgage in Principle, sometimes called a Decision in Principle or Agreement in Principle (AIP), is a provisional certificate from a mortgage lender showing roughly how much you could borrow, based on your financial circumstances. It’s not a formal mortgage offer and it’s not a legally binding commitment to lend. Instead, it gives you a rough idea of your budget before you start searching for a property, and proves to estate agents that you’re a serious buyer once you’ve found somewhere you want to make an offer on.
Most lenders offer a Mortgage in Principle free of charge and with no obligation to take out a mortgage with them afterwards. Getting one doesn’t commit you to a particular lender, a particular property, or a full mortgage application.
How is a Mortgage in Principle different from a mortgage offer?
It’s easy to confuse a Decision in Principle with an official mortgage offer, but they’re very different stages of the process:
- A Decision in Principle is based on limited financial information, usually your income and a summary of your regular bills, checked against a soft credit check. It gives an early indication of how much you could borrow.
- A formal mortgage offer only comes after a full mortgage application, with a full credit search and detailed affordability checks on your financial situation, including bank statements and verification of your income.
In short, a Mortgage in Principle tells you roughly what a lender might lend. A mortgage offer confirms, formally, that they will.
Does getting a Mortgage in Principle affect your credit score?
This is one of the most common questions from first time buyers, and the answer depends on the type of check involved.
A Decision in Principle is normally based on a soft credit check. A soft credit search lets the lender view a summary of your credit file and credit history without leaving a mark that other lenders can see, so it doesn’t affect your credit score. Applying with several lenders to compare mortgage deals at this stage generally won’t harm your credit rating.
A full mortgage application is different. It involves a hard credit check, which does appear on your credit report and can affect your credit score, particularly if you make more than one agreement in principle application in a short space of time or apply to several lenders for a full application. This is why it’s worth using a Decision in Principle to narrow down the right mortgage and lender before moving to a formal application.
How do I get a Mortgage in Principle?
Most lenders let you apply for a Decision in Principle online, and many can give you an instant decision, often in around 15 minutes. Some lenders also offer a video appointment if you’d prefer to talk it through with someone rather than apply online.
You’ll typically need to provide:
- Your income and financial information, including any regular bills or existing credit commitments.
- Your address history, usually covering the last three years.
- Basic details about your financial circumstances, such as employment status and any missed payments on your credit file.
Because it only requires a soft credit check, most lenders can give you a Mortgage in Principle without a full credit check, keeping the process quick and low-risk while you start searching for a property.
How long does a Decision in Principle last?
A Decision in Principle typically stays valid for somewhere between 30 and 90 days, depending on the lender, with 60 to 90 days being the most common range. Some lenders offer a shorter 60-day window. If your Decision in Principle expires before you’ve had an offer accepted on a property, you can usually reapply without penalty, and many lenders let you renew or repeat the process online whenever you need to.
It’s worth remembering that a Decision in Principle doesn’t guarantee a mortgage offer. Even with a valid one in place, a lender can still decline a full mortgage application if your financial circumstances change, or if something arises during the full credit search or affordability checks that wasn’t visible from the earlier, more limited information.
Why do estate agents ask for a Mortgage in Principle?
Estate agents will often ask to see a Mortgage in Principle before they’ll put forward an offer to a seller, or before arranging viewings on certain properties. It demonstrates financial credibility, showing the seller and agent that you understand what you can afford and are in a genuinely strong position to proceed, rather than an early-stage buyer with no sense of their budget.
Should I get a Mortgage in Principle before I start house hunting?
Getting a Mortgage in Principle early is generally a good idea. It gives you a clear, realistic sense of how much you could borrow before you fall in love with a property that’s outside your budget, and it can speed up the formal mortgage application process once you’ve found the right place, since some of your financial information will already be on file with the lender.
A mortgage adviser can talk you through the different mortgage products available from a range of lenders, help you compare mortgage deals, and guide you through all the necessary steps from your Decision in Principle through to a full application and an official mortgage offer.
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Our mortgage advisers offer whole-of-market advice, helping you understand what you could borrow, compare mortgage products from many lenders, and move from a Decision in Principle to a full mortgage offer with confidence. Request a callback today.
