Getting A Mortgage Agreement In Principle – All You Need To Know – Forbes Advisor UK

A mortgage Agreement in Principle (AIP) is a document that indicates that a particular lender would be willing to lend you a specified sum, based on details you’ve provided about your income, spending and debts.

An AIP is not a promise, guarantee, or a formal mortgage offer. Nor does it tie you to the mortgage lender in any way.

An Agreement in Principle can also be known as a Decision in Principle or DIP.

Who needs a mortgage Agreement in Principle?

Mortgage AIPs are mostly aimed at first-time buyers as the first step towards getting a mortgage.

An AIP can be a handy way of establishing your borrowing capacity. And this, in turn, can help you tailor your property search to homes within your price range.

From an estate agent or seller’s perspective, an AIP goes some way to prove you are a serious buyer. For example, some estate agents may ask to see your mortgage in principle before they will allow you to view a property.

However, an AIP is arguably less important when you’re selling your home and buying another one. 

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How long does it take to get an AIP?

You can apply for a mortgage in principle at most lender websites. It only takes a few minutes to enter your details and even get the decision. 

For example, Halifax says it takes about 15 minutes and you get the decision straight away. You can then download the AIP, print it or store it digitally on your phone.

You don’t need to already be a customer of a particular bank to get a mortgage in principle from it. You can also get one via a mortgage broker. 

How long is an AIP valid for?

An Agreement in Principal on a mortgage is normally valid for 90 days. Although some lenders offer less than this (at Santander it’s 60 days, for example) while others offer more (First Direct’s are valid for up to six months).

These timescales assume there aren’t any changes to your income, regular spending and any debts you might have, in this time period. If there is – you get a better-paid job, for example – you should apply for another mortgage in principle.

Do you have to pay to get a mortgage in principal?

No. A mortgage in principle is free of charge. If someone tries to charge you for a mortgage in principle, go elsewhere.

If you proceed to a mortgage offer, there will probably be fees for arranging the mortgage and, if relevant, a mortgage broker fee.

What information is required?

To get a mortgage in principle you will need to provide certain information both about you and anyone you are jointly buying the property with.

The information includes:

  • your name, address and date of birth 
  • addresses you’ve lived at for the past three years 
  • details of your income 
  • details of your monthly outgoings including existing credit agreements

Do all mortgage lenders use the same templates?

No – how mortgage lenders present mortgage in principle information varies. Some give you a statement that says they’re willing to lend a stated amount. Others will state the maximum sum they are theoretically willing to lend.

Does a mortgage in principle affect your credit score?

No – getting a mortgage in principle doesn’t impact your credit score. This is because lenders will just run a ‘soft search’ on your credit report, which doesn’t leave a footprint behind. 

If you go on to apply for an official mortgage, a ‘hard search’ will be carried out. And this will leave a footprint on your credit report which will be visible to other lenders.

Is a mortgage in principle different to a mortgage offer?

Yes – a mortgage in principle differs from a mortgage offer in several ways.

  • It doesn’t commit the mortgage lender to offering you a mortgage. Neither are you committed to that particular lender
  • It doesn’t refer to any particular property. A mortgage offer, on the other hand, will be for a specific property on which your offer has been accepted. 

To get a formal mortgage offer, you’ll need to go through the full mortgage application process, provide documents to prove your identification and income, and complete an affordability assessment.

The mortgage lender will also carry out a hard search on your credit report – this is more in depth than a soft search. 

Does getting an AIP mean I’ll definitely get a mortgage?

A mortgage in principle doesn’t guarantee you can get a mortgage, but it will give you an idea of whether you’d be able to borrow the amount you need.

Even if your mortgage in principle is accepted, your full mortgage application could be rejected later. 

This could be because you can’t prove your income, you fail the affordability assessment, your credit score isn’t high enough, or the lender refuses to lend on the property you’re buying.

Can I be turned down for a mortgage in principle?

You might be turned down for a mortgage in principle if you:

  • have inadequate or unreliable income
  • don’t have a big enough deposit
  • have changed jobs or gone self-employed recently
  • spend too much money in relation to what you earn 
  • have a poor credit score
  • have too much other debt

Especially if you are new to buying property, seeking the advice of a mortgage broker can be a good place to start. Many, such as our partner Trussle, do not charge the customer a fee.

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