A mortgage agreement in principle is a statement from a lender confirming how much they might be prepared to lend you for a mortgage.
Sometimes known as a mortgage ‘decision in principle’, a ‘mortgage promise’ or a ‘mortgage in principle’, a mortgage agreement in principle can provide a really useful indicator of how much you may be able to borrow.
Remember, however, that having a mortgage agreement in principle is not the same as having a firm mortgage offer, and there are no guarantees that you’ll be offered a mortgage for the amount the lender has agreed in principle.
Here, we explain everything you need to know about mortgage agreements in principle, how you can get one, and how they can help boost your chances of getting an offer on a property accepted.
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
What is a mortgage agreement in principle?
As the name suggests, a mortgage agreement in principle is when a lender consents in principle to lend you a certain amount for a mortgage. It’s really just an estimate though, rather than an official confirmation that you’ll definitely be able to borrow that amount.
Lenders provide these to prospective borrowers as it can help speed up the buying process. However, they will want to look at your income and outgoings in much more detail before they’ll provide you with a formal offer.
How do I get a mortgage agreement in principle?
Your first step towards getting a mortgage agreement in principle should be to think about which lender you might want to get your mortgage from.
If you’re ready to start comparing mortgages, this mortgage comparison tool enables you to compare more than 15,000 mortgages from over 90 different lenders in minutes.
If you are unsure about anything it can be good to speak to a mortgage broker or advisor to make sure you find the best deal for you based on your individual circumstances. Find out more in our article Should I get advice on my mortgage?
Speaking to an experienced mortgage advisor can help you to understand your options and get a great deal on your mortgage. If you’re looking for expert mortgage advice, you can speak to an independent mortgage broker with Unbiased. Every advisor you find through Unbiased will be FCA-regulated, qualified and unconnected to product providers – so they can offer you truly unbiased advice.
You’ll then need to ask the lender you’ve decided you want to get a mortgage from for a mortgage agreement in principle, or if you’re using a broker, they can do this on your behalf. Getting an agreement in principle can often be done online in around half an hour, provided you have the information the lender requires. This will include:
- The address that you’ve lived at over the past three years
- Your income, including any bonuses or commission, any pension or benefits payments
- Details of any credit card or loan repayments
- Other outgoings, such as childcare costs or car finance
Alternatively, you can usually apply for your decision in principle over the phone, and again this should take around 20 or 30 minutes to complete. Your lender will then be able to put the decision in principle in the post, or send it across to you via email.
Getting a mortgage agreement in principle usually only involves a ‘soft’ credit check, where lenders view your report, but no other lenders can see that they have done this, so it shouldn’t affect your credit score. Your lender will only go through a full credit check when you submit your full mortgage application. This will leave a footprint on your credit score, and other lenders will be able to see that your file has been reviewed.
Why get a mortgage agreement in principle?
Having a mortgage agreement in principle in place before you start your property search shows sellers and estate agents that you are serious about buying, so it’s definitely a good idea to get one.
It can also provide you with a rough idea of how much you’re likely to be able to borrow, so you’ll know which property price bracket to look in. This can help ensure you don’t waste time looking at properties which you wouldn’t be able to afford.
Does having a mortgage decision in principle mean I’m guaranteed a mortgage?
Unfortunately not, a decision in principle is exactly that, so there are no guarantees you’ll be offered a mortgage for that amount. You can only be certain that you’ll get a mortgage once you’ve been through the full application process and your lender gives you a firm mortgage offer.
The mortgage application process is much more stringent than the process of getting a decision in principle, and you’ll have to prove to your lender that you can afford monthly repayments both now and in the future. Find out more about how it works in our guide How to apply for a mortgage – everything you need to know.
How long will my mortgage agreement in principle last?
Your mortgage agreement in principle will usually last for 90 days, so you’ll ideally find a property you want to buy within this period. If you don’t, then you may want to apply for another agreement in principle so you can still prove to sellers that you’re committed to buying.
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