What is an ‘Agreement in Principle'?
An Agreement in Principle (AIP), also known as a Mortgage in Principle or Decision in Principle, is a written estimate from a lender outlining how much you might be able to borrow based on your current financial situation. Think of it as a pre-approval that provides a clearer picture of your borrowing potential before you start house hunting.
How does an AIP work?
To obtain an AIP, you’ll need to provide some basic information to a lender or mortgage adviser. They will review your financial situation including income, debts, and other relevant details to assess your affordability. Based on this information, they will give you an AIP, which shows the approximate loan amount you can expect to be offered. Take a look to see what you need for a mortgage appointment and what to expect, so you're prepared.
Why is an AIP important?
Having an AIP can be incredibly useful during your property search. Some estate agents will request proof of an AIP before they allow you to view a property or submit an offer. This reassures them that you're financially capable of affording the property, reducing the risk of the sale falling through.
An AIP isn't a full mortgage offer.
It’s important to understand that an AIP is not a guarantee of a mortgage. While it provides a rough estimate of how much you can borrow, you will still need to submit a full mortgage application once you’ve chosen a property and had your offer accepted.
At this stage, your mortgage adviser will take the information from your AIP and carry out a detailed assessment of your finances to issue a full mortgage offer, assuming your circumstances remain unchanged.
Will you definitely be approved for the AIP amount?
An AIP gives you an idea of how much you could borrow, but it does not guarantee approval for that full amount. Your circumstances may change before your full mortgage application, and if any significant factors change (such as your deposit size or job status), it could affect your final mortgage approval.
Credit checks and how they impact your credit score.
In order to issue an AIP, the lender will run a credit check. It’s important to note that a ‘hard credit check’ which some lenders use, will leave a ‘footprint’ on your credit record. Multiple hard checks within a short period could negatively impact your credit score. However, some lenders use a ‘soft credit check,’ which does not leave a footprint. Always clarify with your lender or mortgage adviser which type of credit check they will perform.
What's next after getting an AIP?
Once you have your AIP, you can confidently start viewing properties within your budget. If you're ready to apply for a mortgage, the next step is to work with your mortgage adviser to submit a full mortgage application.
Our expert mortgage advisers will guide you through the entire process and ensure that everything is in order for your application. Typically, it takes only a short time to receive an AIP, and our advisers aim to get back to you within 24 hours with an update on your application.
What about a mortgage certificate?
In addition to an AIP, we can also provide a Mortgage Certificate. However, some estate agents may not accept this document as it's issued by an adviser, rather than a direct lender. It’s always best to confirm whether a Mortgage Certificate will be sufficient in your specific situation.
Do you have to pay for an AIP?
We don’t charge any fees for providing advice or obtaining an AIP for you. However, there is usually a fee for processing your mortgage application.
Get in touch.
Our Mortgage Advisors offer a free initial, no obligation meeting where they can assess your needs and give tailored advice, including an AIP if applicable.
If you're ready to get your Agreement in Principle or need help with the next step in your mortgage journey, don’t hesitate to speak with one of our experienced mortgage advisers today. Call us at 0117 2050240 for personalised guidance.
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