How long does a mortgage in principle last?
19 September 2022
Answer: Between 30 and 90 days
A mortgage in principle is also known as an agreement in principle (AIP) or decision in principle (DIP). Whilst they are known by different names, they all refer to the same process. This process involves a lender stating how much in principle they would be willing to lend you. The important factor to note here is the in principle, this is to say that the offer is not binding. The lender is still entitled to and may well reject a mortgage application from you for the same loan amount, should other factors arise during the full mortgage application process. The mortgage in principle is indicative that the lender might be willing to provide a mortgage along those terms, dependent upon a thorough investigation into your financial history, commitments and circumstances.
A mortgage in principle will typically last between 30 and 90 days, depending on the lender. You can apply for a mortgage in principle directly from the lender (the bank or building society), or through a mortgage broker. A mortgage broker will typically have access to a wider range of mortgage deals than are available online.
Is a mortgage in principle essential?
Put simply, no, a mortgage in principle is not essential when applying for a mortgage. However, there are several good reasons to consider applying for a mortgage in principle before embarking on the full mortgage application process.
- A mortgage in principle helps to give you a clearer idea of what mortgage products you can afford, giving you a better understanding of what you can afford. Not only will this help you search for suitable properties, but can also help you to avoid later applying for an unsuitable mortgage product that gets rejected. A rejected mortgage application can be a negative thing to have on your credit report, and might make later applications harder.
- Due to a high number of viewing requests, some estate agents will try to minimise the amount of time wasters by requiring a mortgage in principle before you can view a property. This mortgage in principle will help to show that you are a serious, proceedable buyer.
Does a mortgage in principle require a credit check?
Every mortgage in principle requires a credit check, however there are different types of credit check, namely soft and hard searches. A soft credit check does not leave a footprint, which is to say that this search will not be visible to other lenders and will not affect your credit rating. On the other hand, a hard credit check will show on your credit report as an application for credit. Whilst these applications are not necessarily a bad thing and shouldn’t affect your credit rating, a large amount of credit applications in a short period of time might be a red flag to a lender as they might assume you were rejected for credit. Before applying for a mortgage in principle, it is vital to understand whether the lender or broker will engage in a hard or soft credit check. This is especially important if you seek to apply for multiple mortgage in principle agreements, which might be the case should you be unhappy with an amount estimated by one specific lender.
How to apply for a mortgage in principle
Applying for a mortgage in principle is usually free through either a broker or a lender. To apply for the mortgage in principle, you will be asked several questions about your finances and will be required to show the following:
- Information about your income, such as payslips and bank statements, as well as accounts if you are self-employed
- Records of your expenditure and spending, such as credit card bills and subscriptions
- Details of any existing credit agreements such as car payments
- Housing records going back usually for three years
When should you apply for a mortgage in principle?
With the average mortgage in principle lasting between 30 and 90 days, it is recommended that you apply for a mortgage in principle once you are ready to commit to house-hunting and the full mortgage application process. You can always apply for another mortgage in principle if your initial agreement has lapsed, however this could have an adverse effect on your credit score if the credit check is a hard search. Renewing a mortgage in principle should be relatively straightforward if your financial circumstances and the mortgage market has remained stable.
Why might a mortgage in principle be rejected?
Whilst being rejected for a mortgage in principle might harm your credit score, it is likely to not have as significant an impact as a rejected mortgage application. There are a number of factors that might lead to your mortgage in principle being rejected:
- Your income is not sufficient for the mortgage product or total value that you are applying for
- Your income is seen as too volatile and not reliable enough to sustain a long term mortgage product
- Your deposit is not large enough to cover the risk to the lender
- You have changed jobs too frequently or too recently which implies an unstable income
- Your expenditure and spending habits are not suitable
- Your credit score or debt levels are not suitable
- Incorrect or incomplete information within your application
If you are wanting to start your mortgage process by applying for a mortgage in principle, we are on hand to help you with the application. Our team of specialist mortgage advisors will help to provide tailored and personalised advice for you and your financial situation, helping you to move into your dream home.