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What is a mortgage Agreement in Principle?
Who is this page for?
This page is for homebuyers interested in what a mortgage Agreement in Principle (AIP) is and how you could get one. If you’re all set and ready to start viewing properties you can find out how much you could borrow with a Lloyds Bank Agreement in Principle.
You could lose your home if you don’t keep up your mortgage repayments
What is a mortgage Agreement in Principle?
If you’re searching for your perfect home – or you’ve found it and want to make an offer – you’ll need to know how much you could borrow.
This is where a mortgage Agreement in Principle, or Agreement in Principle (AIP), comes in. The amount shown on the AIP is not guaranteed and is subject to a full mortgage application.
You won’t need to make a full application to get a mortgage Agreement in Principle – just provide a few simple details over the phone, online, or in person.
Some estate agents may ask to see proof of your mortgage Agreement in Principle before they accept an offer, as it shows them you’re serious about buying. Whether you have a mortgage Agreement in Principle or not, you still need to apply for a full mortgage later.
How to get a mortgage Agreement in Principle
In most cases, it’s a simple process and can be done with your potential mortgage provider online, over the phone, or at your nearest branch. You’ll usually receive a decision within around 15 minutes of applying, depending on the circumstances.
You just need to follow these simple steps:
- Start the application online, call your lender or visit your nearest branch.
- Provide the details required – usually information about your income and monthly outgoings, how much you want to borrow, and your previous addresses for the last three years.
- Collect supporting documents such as payslips, bank statements, and rental or mortgage agreements.
- Undergo a credit check to assess your financial situation and work out how much you could borrow.
An AIP doesn’t guarantee you a mortgage and you can still apply for a mortgage Agreement in Principle with other lenders. However, the amount offered can give you an idea of your potential budget.
If a provider refuses your mortgage agreement in Principle, it’s not the end of the road. You can re-apply with the same or another provider. Understanding why they refused can highlight the issues to address before you re-apply.
Will a mortgage Agreement in Principle affect my credit score?
A lender will run a soft credit check when deciding whether to offer an AIP. One or two soft checks shouldn’t affect your score. However, multiple applications in close succession could be visible to other lenders.
Why apply for an Agreement in Principle
A mortgage Agreement in Principle can speed up the home buying process for all involved and can reassure the seller you’re a serious buyer. There are three main parties it is used by:
- Seller/estate agent – It gives the seller and estate agent confidence you’re serious about buying and can afford the property.
- Mortgage provider – Conducting the necessary assessments makes it quicker to arrange a mortgage and reassures the provider you can afford the repayments.
- The buyer– Shows whether you meet the provider’s eligibility criteria. It’ll also estimate how much you could borrow, which can guide your property search.
An AIP is not a guarantee of a mortgage offer. When you make a full mortgage application, the lender may change their decision or offer different terms. This can be due to changes in your circumstances or the lender’s criteria.
How long does a mortgage Agreement in Principle last?
A mortgage Agreement in Principle is typically valid for between 60 and 90 days – plenty of time to view properties and find your perfect home.
If it takes a little longer to find a home you want to buy, don’t worry. If the agreement expires before you arrange a mortgage, you can re-apply with the same or a different lender.
It’s also worth noting you’ll need to apply for a new mortgage Agreement in Principle if your circumstances change while you’re looking for a new house.
For example, if your income or outgoings change significantly, or you decide you want to buy a more expensive home.
The content on this page is for reference and does not constitute finance advice.
For impartial financial advice, we recommend government bodies like the MoneyHelper.
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