Mortgages in principle: an expert guide for beginners

What is a mortgage in principle, when should you get one, and how to do it? We answer your questions

mortgage in principle
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Thinking of getting a mortgage in principle before you start looking for your first home? Or perhaps you've already found the home of your dreams and would like to confirm with your broker or lender that you'll most likely be approved for a mortgage? 

These are the most common reasons for getting a mortgage in principle (MIP) or agreement in principle (AIP). And while getting an MIP or AIP is not the same as actually getting a mortgage, it can also increase your chances of getting the house you've wanted. Getting the best mortgage deal can also be easier if you have a better idea of what you can afford to borrow.

We explain how the application works, what you'll need, and what the steps are after you get a mortgage in principle. Ready to take the first step? We have a handy (free) mortgage comparison tool; use it below to find out what you can afford. 

For more detailed information of all the different steps of applying for a mortgage, read our guide to mortgages for first-time buyers

What is a mortgage in principle?

A mortgage in principle (MIP) is actually little more than the results of a search, performed by a broker, that gives you the approximate figure of how much you could borrow for a mortgage. When you use an online mortgage calculator, inputting your basic details such as income and deposit amount, the resulting figure is the equivalent of a broker telling you that this is how much you'd be likely approved for when applying for a mortgage. It's for your personal information only.

Find more about how much you can borrow for a mortgage in our guide. 

An agreement in principle (AIP) is what is often incorrectly referred to as a mortgage in principle, but is actually different and requires paperwork to obtain. An AIP is a more detailed enquiry that results in a lender or broker issuing you a certificate that states how much you are likely to be approved for; the words 'in principle' are crucial here. This certificate will typically be valid for 30 to 90 days. 

When do I need a mortgage in principle?

A mortgage in principle is a sensible estimate to obtain for anyone looking to buy a home. It will give a good idea of what properties you should be looking at, and whether you were way off in your estimations of what you can afford.

An agreement in principle will give you an even better idea of how much you'll be able to borrow, and it can give you an edge over other buyers for competitive properties. A seller may well see you as a better buyer if they have an AIP from you in hand. 

If you're in Scotland, you'll pretty much need an AIP as standard for sellers and lenders to take you seriously. 

If you're in England and Wales, on the other hand, do note that getting an AIP does not replace the full mortgage application process. If you are very confident in your finances, and your circumstances are very straightforward, you may well decide not to get an AIP and go straight through to a full mortgage application on the property you want. 

How do I apply for a mortgage in principle?

Seeing your MIP figures can often take as little as a few minutes. If you play around with our mortgage comparison tool, for example, you'll see the results in as little as five minutes.

An AIP is not much more daunting than that, with results usually available within 24 hours. You will need a bit more paperwork, namely your ID, proof of address, and three months' payslips (three years' tax returns if you're self employed). Your broker or lender may also ask for bank statements to see your monthly outgoings. They will then perform a credit check before deciding whether to issue you with an AIP. 

Does an agreement in principle guarantee a mortgage?

No. It's important to stress that neither a mortgage in principle nor an agreement in principle are legally binding contracts; they are 'for information only', and they take into account that your circumstances may change in the interim between beginning the house search and applying for the actual mortgage. Having said that, unless something very drastic happens, you can take an AIP as a good indication of whether you'll be approved for a mortgage. 

Will a mortgage in principle affect my credit score?

An MIP, such as when you get verbal advice from a broker or use an online mortgage calculator, does not affect your credit score in any way, because no credit check is performed.

An AIP can affect your credit score if the lender performs what's known as a 'hard search', which is an in-depth credit score check similar to those performed as part of actual mortgage applications. A 'soft search', by contrast, is a basic or surface credit check that shouldn't leave a footprint on your credit history. 

A 'hard search' isn't necessarily something to worry about, though. Even one rejection shouldn't damage your credit rating. Do be wary of multiple AIP rejections, though, as that can begin to negatively affect your chances of getting a mortgage. If you get rejected for an AIP, this is your chance to ask the lender or broker why, and what you can do to remedy the situation.  

In any case, it's a good idea to ask the lender what kind of a search they'll be doing before you go through with your AIP application. Bear in mind, also, that when you go on to submit your full mortgage application, you'll be undergoing another credit check, and this one will definitely be an in-depth one. 

Do I have to go with the lender that issued my AIP?

Not at all. It's common practice to go with a different lender from the one that issued you the AIP in the end, if your broker finds you a better deal. Rates and mortgage offers can change, and it won't be held against you if you do end up going with a different lender. 

Comparing mortgages

Ready to begin the process? Use our handy mortgage comparison tool, which we've created with mortgage experts Habito. It's free to use and can get you your mortgage in principle in minutes. After that, you can call them for further mortgage advice. 

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