2021 Update

What is a Mortgage in Principle?

Joe Bailey

Most of us know what a mortgage is, but what about a "Mortgage In Principle"? If you're not familiar then this quick explainer will help.

Mortgage In PrincipleMortgage In Principle

As responsible adults (well, mostly) the majority of us are probably aware of what a “mortgage” is. However, there’s another term in the home-buying world that is often used and may not be as familiar to those looking to secure the next place they’re going to live in - the “mortgage in principle.”

So, what does this term mean, and what do you need to know about it? We’ve gone through and outlined some of the important things you need to be aware of in this article.

This is our guide to the “Mortgage in Principle.”

  • It’s basically a statement that you’ll get a mortgage on a house - So, what exactly is a “Mortgage in Principle”? Speaking basically, it’s an statement from a lender - a bank, generally - that details the amount of money you’d get in a loan for the house, based on a kind of preliminary check.
  • The “Mortgage in Principle” is usually a necessary step in the process - The “Mortgage in Principle” will almost always occur during the home-buying process; the reason for this is that the lender will then be able to check your finances and credit and make sure that you’re worthy enough for a loan. Know, too, that you can apply for a “Mortgage in Principle” at any time during the start of the home-buying process; there’s no right or wrong time to get one.
  • It’s also usually a good idea to get one - Securing a “mortgage in principle” will show the sellers of the house that you’ll have no trouble securing the money you’ll need to buy the property. Additionally, if there aren't any red flags in your credit history, securing an effective “mortgage in principle” will help cement your standing with the sellers. It’s a good, added bit of security for them.
  • It’s not always called a “Mortgage in Principle” - Something to remember about this term: it may be called something different. When it comes to this, you may also hear the terms “Mortgage Promise,” “Agreement in Principle” or “Decision in Principle” (with their assorted acronyms); those all mean the same as a “Mortgage in Principle.”
  • It’s not a guarantee - Know that the “Mortgage in Principle” is not a guarantee that you’ll get a mortgage. After the lender checks your information, they may or may not decide to offer you the mortgage.
  • Your estate agent may want you to get one - Don’t be surprised if your estate agent requests that you secure a “Mortgage in Principle” at some point in your working relationship. Again, having that on hand will make you a more attractive homebuyer.
  • There could be effects on your credit file - Be sure to check with the lenders on their methodology when it comes to looking through your credit file. Some will leave what’s called a “soft” imprint, which doesn’t have much of an impact on the file; however, many will use the opposite (called a “hard” imprint) which, if done enough by enough lenders, could adversely affect your credit score. Be careful!

Further Reading:

If you're looking into a Mortgage In Principle because you're buying a new home and selling your existing one, consider our part-exchange programme. Having a sale agreed on your property puts you in a strong position to secure your next purchase (and negotiate a great deal).

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