Mortgage terminology can be confusing. From porting a mortgage and getting gazumped to equity release and leaseholds vs freeholds.
But one of the most common phrases that stumps first time buyers time and time again is a mortgage in principle.
What is a mortgage in principle?
“Sometimes referred to as an agreement in principle or a decision in principle, a mortgage in principle is a written estimate from a mortgage lender giving you an indication of how much money you can borrow,” explains multiple award-winning mortgage advisor, Jo Jingree.
“Generally speaking, this written estimate is valid for anywhere between 30 days and three months,” Jo says. “Having one up your sleeve when you’re buying a home can make all the difference when it comes to securing your dream property.”
To find out everything you need to know about this all-important document, including when to get one, the benefits of doing so and how long it takes, stick right here.
The benefits of getting a mortgage in principle
There are a few. Securing a mortgage in principle can:
- Help guide you, the home buyer, in your property search as you will know what a lender might be prepared to lend, subject to a full mortgage application. “Therefore you’ll have an idea of your budget,” Jo says.
- Present you as more of a serious buyer to the estate agent and seller. “This can be favourable if the market is competitive,” Jo says. “And especially if you are in a bidding situation as you might be more ‘mortgage ready’ than the others, so it can give you an advantage.”
- Put you one step ahead in the buying process. “An estate agent will always ask for it after you make a successful bid as they’ll want to check that you are in a proceedable position to continue,” Jo says.
When’s the right time to get one?
That depends. “If you are a first time buyer and you have got nothing to sell, I usually advise on getting a mortgage in principle when you are ready to start viewing properties, rather than just browsing online,” Jo says.
That’s because, depending on the lender, this piece of paper, which gives you a fairly reliable indication of what you may be able to borrow, is only valid for up to three months.
“If you get a mortgage in principle too early it may be redundant by the time you start viewing properties,” Jo explains.
If you’re in the position of selling your home and you are planning to buy another one, it’s a bit different.
“Selling a home might take longer than three months, so it might be wise to wait until you’re under offer before sorting out a mortgage in principle,” Jo says. “Doing so before might put extra pressure on yourself, at an already stressful time, to find your next property.”
However, if your circumstances are more complicated — for example, maybe you need to know how much you can borrow before you even consider moving — it’s worth speaking to a mortgage advisor to get more bespoke advice.
How long does it take to get a mortgage in principle?
It’s important to note that a mortgage in principle isn’t guaranteed. There’s also no guarantee that you’ll get the full loan outlined in the original document too, especially if your circumstances have changed or you’ve failed to disclose important details when applying for your mortgage in principle.
“On the whole, a mortgage in principle can be turned around in 48 hours,” Jo says. “But that will vary depending on the person and the lender. If you are credit impaired or have no credit history, this may take longer.”
If you’re looking to get a mortgage in principle, you’ll need to provide your personal details including evidence of your income, expenses, ID, address history and proof of your deposit. Other documents may be requested depending on your circumstances.
Will a mortgage in principle produce a hard or soft credit check?
The good news is that a mortgage in principle doesn’t have to affect your credit score. That’s because, with the majority of lenders, a mortgage in principle involves a soft credit check. This means that only you can see the footprint and no one else.
Whereas when you apply for a full mortgage, a hard credit check is carried out.
Your home buying journey is in safe hands
Whether you’re a first time buyer who is ready to buy now and in need of a mortgage in principle. Or you’re just browsing the property market shelves wondering how much you can afford to borrow.
Jo offers a 30-minute free no-obligation phone consultation to answer any queries and questions and get the property-buying wheels in motion.
There may be a fee for mortgage advice. The precise amount will depend upon your circumstances, but we estimate it will be £399.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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