Mortgage Agreement in Principle
A Mortgage Agreement in Principle (otherwise known as an MIP or AIP) is a document stating how much you're able to borrow from a lender, provided the information you've supplied is accurate.
It’s the first step in the process of securing a mortgage.
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How arranging a Mortgage in Principle works
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How much can I borrow?
Get a quick idea of what you might be able to borrow for your next home.
How to get a Mortgage in Principle
There are two ways to go about securing a Mortgage in Principle.
1: Approach banks and building societies
You can approach any lender to secure your first mortgage.
If you want to secure a mortgage as quickly as possible, going to your existing bank could be a good option.
Equally if you have strong preferences for a particular lender or mortgage, and are confident in the process, you may prefer to handle the mortgage application yourself.
You can approach as many lenders as you wish to find the best mortgage rate options for you, although it can be time-consuming to repeat the process with each lender.
2: Work with a mortgage broker
A mortgage broker will scour the whole market to find the best deals on your behalf.
They have access to deals that aren’t available on the high street as some lenders only work through brokers.
They can help to speed up the move and reduce the stress of the house buying process.
They can also help out if your credit rating isn’t where it ideally needs to be, if you have income/affordability issues, a less straightforward employment history or are buying a unique property.
How much could my mortgage repayments be?
Get a quick idea of how much it's going to cost each month or how a rate change could affect your monthly payments.
When should you apply for a Mortgage in Principle?
A Mortgage in Principle is typically valid for one month, but this can be extended if needed. In some cases, MIPs are valid for up to 60 or even 90 days.
If you're looking to use a mortgage to buy a property, estate agents like you to have an MIP in place before you start viewing properties, as it shows you're a serious buyer.
An MIP proves that you are eligible for a mortgage and gives an indication of how much you can borrow. A mortgage offer is an official agreement with the lender that they'll provide you with a mortgage.
How long does it take to get a Mortgage in Principle?
The process of applying for a Mortgage in Principle can take between a few minutes to an hour.
You'll usually go through an online application first, followed by a telephone conversation with a lender or mortgage broker.
Once you've completed the application, it can take between a few days to a couple of weeks to hear back from the lender or mortgage broker.
How long does a Mortgage in Principle last?
A Mortgage in Principle is valid for between 30-90 days.
If you haven't managed to find a property within that time, you can ask to renew it or apply for another one.
As long as your situation, or the economy, hasn't changed dramatically since you first applied, then renewing your MIP should be fairly straightforward.
Mortgage in Principle FAQs
What do you need for a mortgage in principle?
To arrange your Mortgage in Principle you'll need documents that prove:
Your address history
Photo ID
Name and date of birth
Proof of income
Recent bank statements (usually going back 3-6 months)
Proof of deposit
Details of your monthly outgoings and expenses
How reliable is a Mortgage in Principle?
A Mortgage in Principle gives a good indication of what you can borrow.
However it's not the same as a mortgage offer, and different lenders have different acceptance criteria when it comes to offering mortgages.
If a lender uncovers something that doesn't meet their acceptance criteria when offering a mortgage, it is possible that you may not get a mortgage offer from them.
That said, as long as your personal circumstances - and the economic climate - haven't changed since you secured your MIP, then it's a reliable first step in indicating how much you'll be able to borrow.
What happens after a Mortgage in Principle?
Your Mortgage in Principle is valid for between 30-90 days, so the next step is to find a property within your price bracket and put in an offer.
Once the offer has been accepted, you'll return to your lender or broker and go through the full mortgage application process with them.
The process of moving from MIP to a full mortgage offer takes between 2-4 weeks.
Mortgage in Principle: what can go wrong?
You're not offered the full amount you were hoping for. If this happens, you're free to approach other lenders, but it's worth checking whether they conduct a soft or hard credit check at this stage. Too many hard credit checks can damage your credit rating.
Your financial circumstances change. If, for example, you lose your job, or separate from your partner when the MIP was offered based on 2 incomes, this could affect your lender's acceptance criteria in offering you a mortgage.
You fail a hard credit check. Some lenders may use a soft credit check to see if you're eligible for a Mortgage in Principle and then run a hard check when it comes to the mortgage offer itself. Others may go straight in with a hard check. But if you fail the hard check, you may be turned down for a mortgage. Even missing a credit card payment could impact your ability to get a mortgage.
The home you want the mortgage for has problems. Your lender will want to value the property you're planning to buy, to check that it's worth what you want to pay for it. Sometimes, there can be issues with the property that mean it doesn't meet the lender's criteria. For example, it has structural issues or is not of 'standard construction'.