What is a mortgage agreement in principle?
A mortgage agreement in principle is where a lender takes some details on your income, spending, and debts before producing a figure that ‘in principle’ it would be able to lend. It’s a good indication of how much money you can borrow, which can speed up the mortgage application process and help you stand out from other prospective buyers.Do I need a mortgage in principle to make an offer?
A decision in principle isn’t essential when making an offer on a house or flat, but it does show estate agents that you’re serious about buying and have the means to do so. It’s also a good idea to get one if you’re worried about your credit score; they provide some reassurance that you’ll be able to buy a property within your price range.How to get a mortgage in principle
You can apply for a mortgage agreement in principle online, via the phone, or by visiting a lender’s branch. A mortgage promise should be free and you won’t need any supporting documents such as payslips to secure one. However, you will need to show the following to your lender or mortgage adviser:- Your name, date of birth, and address
- Address details for the past 3 years
- Information about your income
- Information about your outgoings and existing credit agreements
How reliable is a mortgage in principle?
It’s important to remember that a mortgage agreement in principle is not the same as a mortgage offer. It’s simply an estimate of how much you can borrow from a specific lender based on your financial situation. Even when they do provide a figure, it’s not guaranteed that you’ll be able to borrow this amount from them. So whilst a mortgage in principle is great for working out what sort of property you afford, it’s not binding on you or the lender that issues it.How long does a mortgage principle last?
Depending on the lender, mortgages in principle are typically valid for between 30 and 90 days. But if you’re getting close to making an offer on a house or flat, the agreement will likely be renewed before its expiry.Will a mortgage in principle affect my credit score?
When you apply for a mortgage agreement in principle, the lender will need to perform a credit check. There are two types of credit checks - ‘hard’ and ‘soft’, so make sure you ask which type they will be running. A hard credit check will leave a footprint on your credit record that other lenders will see, whereas a soft credit check (also known as a ‘quotation search’) won’t appear on your credit file.Mortgage in principle: What can go wrong?
There are several reasons as to why you might be declined for a mortgage in principle. These include:- Poor credit history
- Inadequate income
- Your deposit is too small
- You’re not on the electoral register
- Your application contains incomplete or inaccurate information
