When thinking about getting a mortgage, it’s a great idea to start with a Mortgage in Principle (or MIP). You might have heard this referred to by other names, like a Decision in Principle (DIP), Agreement in Principle (AIP) or Mortgage Promise, but they all mean the same thing. Here’s why you should consider getting a Mortgage in Principle and how it could give you an edge as a home-buyer.
What is a Mortgage in Principle?
A Mortgage in Principle is a free estimate of how much you could borrow. It’s not a formal mortgage offer or a guarantee that you’ll be able to get a mortgage for that amount, so you’ll still need to complete a full mortgage application later on and be assessed against the lender’s own set of criteria. However, having a Mortgage in Principle is a great way to position yourself as a savvy buyer – it can reassure sellers and estate agents that you’ve done your research and can afford the property you want to buy.
How do I get a Mortgage in Principle?
You can get a Mortgage in Principle from a lender or a mortgage broker. You can also get one in the Moneybox app in less than five minutes. It’s free and won’t affect your credit score. Just head in-app to Wealth > Mortgages to get yours.
When filling out the form, you’ll be asked to give a few key details, such as your deposit amount, income and any regular outgoings (like loans or credit repayments). If you’re applying for a joint mortgage with another person, you’ll need to include your combined income and outgoings.
How long does a Mortgage in Principle last?
Unlike a formal mortgage offer, a Mortgage in Principle usually doesn’t expire. However, it’s a snapshot based on the details you provided at the time and the mortgage deals that were available then. If your circumstances change, for example, you get a pay rise or save more as a deposit, you should update your details for a more accurate estimate.
Will getting a Mortgage in Principle affect my credit score?
Getting a Mortgage in Principle will usually only lead to a “soft” credit search. This is a basic check of your credit history and won’t impact your credit score. Lenders will generally only run a “hard” search on your credit history when you come to submit your full mortgage application. Hard searches leave a note on your credit report to let other lenders know that you’ve applied for a form of credit and whether you’ve been successful.
What happens after I get a Mortgage in Principle?
Your next step after getting a Mortgage in Principle is to speak to a mortgage broker to double check your affordability and find the right mortgage for you. It’s best to do this before you make an offer on a property, so you know exactly what you can afford and avoid any disappointment. When you do come to make an offer, your Mortgage in Principle will be a valuable tool, so make sure to tell the estate agent and seller you have one as it might give you an edge!
Your home may be repossessed if you do not keep up repayments on your mortgage.