What Is A Mortgage Agreement In Principle?

One of the most common questions we get asked is what an agreement in principle is, so in this post we answer the question and explain exactly what a mortgage agreement in principle is.

What is an agreement in principle?

An agreement in principle can also be known as a decision in principle or a mortgage in principle. It’s important to understand that this is not the same as a formal mortgage offer. Instead, it’s best to regard an agreement in principle which is technically a statement of positive intent from the lender to borrow ‘x’ amount as a mortgage.

This is by no means a done deal, but it does bring you one crucial step closer to getting a mortgage offer in place and securing the property you want.

When you apply for a mortgage agreement in principle the lender will access your credit record, but here at The Property Portal, when you apply for a mortgage agreement in principle, it’s a soft credit check that is carried out, which means it won’t impact your Credit Score.

Why do I need an agreement in principle?

You don’t have to get an agreement in principle, but most buyers are keen to know exactly how much a lender is willing to give them which is a crucial step in understanding the price range of properties you’ll be able to afford.

Knowing in advance how much you might be able to borrow also means you’ll be able to plan your finances better. This could be particularly important for first-time buyers as it provides peace of mind before applying for a mortgage and a full credit check being run.

Obtaining an agreement in principle means you’re not agreeing to anything either, so it’s a good stepping point that helps you to consider the offer and your potential new monthly outgoings before taking the next step.

How can you obtain a mortgage agreement in principle?

You can use a fast, free online service like The Property Portal to obtain a mortgage agreement in principle, you can also apply direct to your preferred chosen lender.

You’ll need to provide some important information such as your name, date of birth, home address and how long you’ve lived there as well as basic information about your income and expenditure. This will help to determine eligibility and at this stage you won’t need to supply any supporting documents.

Before you apply, you’ll want to have some key figures to hand so you can give accurate data and receive an accurate agreement in principle back.