Moving house and buying a property is a daunting task, especially when you hear confusing words and terminology that you have never heard of before.
Think ‘Stamp Duty’, ‘Equity’ and ‘Mortgage-in-Principle’ – what do these even mean?
We know it can be especially overwhelming for first-time buyers, who have never navigated a house sale before. That’s why in this article, we are taking a deep dive into what a Mortgage-in-Principle is, who needs one and what they’re for.
Getting a Mortgage-in-Principle is one of the first steps that need to be taken for first-time buyers to buy their dream home. We have rounded up some FAQ’s to answer any of your questions.
What is a Mortgage-in-Principle?
A Mortgage-in-Principle (also known as an Agreement-in-Principle) is a statement or certificate from a lender who agrees that ‘in principle’ they would lend you so much money towards a property.
Although this isn’t an official mortgage application, it can give you a clear idea of how much you can afford to borrow, and it proves to estate agents that you are a serious buyer when you come to put an offer in for a property.
How to get a Mortgage-in-Principle
To get an agreement in principle, you’ll either need to approach a mortgage lender, for example, a bank, directly or via a mortgage broker. A mortgage broker can help you find the best deals to suit you and may have the means to give you the best offer.
However, you won’t need to go through the full mortgage application process to get an agreement in principle. This will come later when you’ve had an offer on a property accepted.
What do I need to provide to get a Mortgage-in-Principle?
Even though it’s not a full mortgage application, you will still need to provide information to get an agreement in principle.
You may be asked to provide the following:
- Your name
- Your date of birth
- Three years of address history
- Your income and expenditure
When should I get a Mortgage-in-Principle?
You should get a Mortgage-in-Principle if you are looking to move house before you put an offer for a property. A Mortgage-in-Principle shows that you can actually afford to buy the home you’re interested in, and will give you more credibility with estate agents and sellers or vendors.
When you find the home you want you could get viewings faster. This is especially useful in competitive areas where agreed sales move quickly. Estate agents will appreciate knowing you’re in a position to move ahead if your offer is accepted.
How long will it take to get a Mortgage-in-Principal?
You can apply to get a Mortgage-in-Principle online which should only take 15-20 minutes, and once submitted the decision from the lender is then generated within seconds.
How long is a Mortgage-in-Principal valid for?
Most Mortgage-in-Principles are valid for 90 days, but this can vary depending on the lender’s policy.
If your Mortgage-in-Principle expires, you will need to apply for another via the same process. However, you may receive a different offer even if your personal circumstances have not changed.
For example, you may be given a lower borrowing amount or the lender may not lend to you at all if some of its underlying risk rules or policies have changed.
In some cases, lenders will also have their own criteria to meet – for example, only approve mortgages on a certain number of properties, within a particular new-build development so you may have missed out due to the delay.
How much does a Mortgage-in-Principle cost?
An online Mortgage-in-principle will be free, but if you get an MIP from a broker, some may charge for this service.
Credit checks
Most lenders use a ‘soft credit check’ for an MIP application.
This isn’t recorded on your credit score. But it’s best to check with your chosen lender which approach they use as it may show up on your credit report.
Further reading
Purchases – Oakwood Property Solicitors
WHAT TO DO NEXT
To make a start on the next step in your property journey, get in touch today to book a consultation with a member of our team. Call us on 0113 218 5727 to find out how we can help you.
