What is a mortgage in principle?

14th Jun 2023


You’ve been told you need a mortgage in principle but you know what one is?

It is a certificate or statement from a mortgage lender to say how much they will lend you ‘in principle’ based on some basic information and will often involve a credit search by the mortgage lender. They are also known as:

  • Agreement in principle (AIP)
  • Decision in principle (DIP)
  • Mortgage promise.

A mortgage in principle is the first stage of the mortgage process and should not be mistaken as a full mortgage application or mortgage offer. The full mortgage application is not completed and submitted to the mortgage lender until after you have had an offer accepted on a property. 

Why will a mortgage in principle help you?

A mortgage in principle has many benefits. It helps you to understand how much you can borrow which allows you to search for a property in your price range and save you unnecessary disappointment in the long run. 

Most estate agents will require a copy of your mortgage agreement in principle certificate before accepting an offer on behalf of the seller in order to provide them with the confidence you are able to obtain a mortgage. 

Should you find a property first before you get a mortgage in principle?

No, it is always recommended that you obtain a mortgage in principle before you start viewing properties. This ensures you are searching for properties in the right price range for your circumstances and are fully mortgage ready and in a strong position when you want to put an offer in on a property. 

If you were selling your property, would you choose to accept an offer from someone who hasn’t even considered if they can get a mortgage yet or for the person who is able to demonstrate they are fully mortgage ready and able to provide their mortgage in principle certificate to the estate agent immediately?

A word of caution about mortgage decision in principle certificates

When completed correctly, a mortgage in principle gives you the confidence you can obtain a mortgage with a mortgage lender. However, a word of caution: the mortgage in principle assumes the information input into the system is accurate and does not confirm you meet the mortgage lenders criteria. As a result, we often speak to many first-time buyers and home movers who have had their full mortgage application declined after being pre-approved by the mortgage lender because they have misunderstood how their income is made up (e.g. not all of their income is guaranteed income) or they do not meet the lenders lending criteria when their full application is assessed with their key documents (e.g. payslips and bank statements) by the underwriter. 

The benefits of using a whole of market mortgage expert

It is recommended that you take professional mortgage advice from a whole of market mortgage broker such as The Mortgage Pride prior to obtaining a mortgage in principle. This is because:

  • They often involve a credit search which may affect your credit file
  • You may not match each mortgage lender’s criteria at full mortgage application stage
  • The amount you can borrow may be different to the amount you can afford based on your budget. 

Steven & Laura Lyons of The Mortgage Pride have over 20 years’ of experience in mortgage planning and mortgage advice. Their comprehensive mortgage planning service means you can be confident you are fully mortgage ready when you find your new dream property. 

What is mortgage planning?

The Mortgage Pride’s comprehensive mortgage planning service will guide you safely and confidently through the mortgage and home buying process whether you are a first time buyer or an existing homeowner looking to move home. 

After fully understanding your personal circumstances and your property/financial goals, the mortgage planning service will confirm to you:

  • how much you can borrow
  • how much you can afford to borrow based on your budget
  • how much deposit you will need 
  • how much your new mortgage is likely to cost you (both monthly and any associated fees and costs)
  • if there is a mortgage lender suitable for your personal needs and circumstances.

This will leave you confident you are fully mortgage ready when viewing properties and give you peace of mind that there is a mortgage lender right for you, avoiding any unnecessary stress. So if you want to be a confident homebuyer, contact the friendly mortgage experts at The Mortgage Pride today to find out how their mortgage planning service can benefit you. 

Have a look at our September 2020 e-magazine

*Your home may be repossessed if you do not keep up repayments on your mortgage.