What Does a Mortgage in Principle Mean?

If you’re in the market to buy a property, you’ve probably come across the term “mortgage in principle.” But what does it actually mean? Essentially, a mortgage in principle is a conditional agreement from a lender to lend you a certain amount of money, based on an initial assessment of your financial circumstances. It’s also sometimes known as a “decision in principle” or a “mortgage promise”.

Here’s how it works. You provide the lender with some basic information about your income, expenses, any personal debt and credit history. They’ll then use this information to carry out an initial assessment of your ability to repay a mortgage.

Based on this assessment, the lender will then use this information to calculate how much you may be able to borrow and may give you a mortgage in principle, which sets out the maximum amount they would be willing to lend you.

It’s important to note that a mortgage in principle is not a formal mortgage offer. It’s simply an indication that you’re likely to be able to borrow a certain amount of money. To actually get a mortgage, you’ll need to go through a full application process, which will involve providing more detailed information about your income and expenses, as well as undergoing a credit check.

Why Would You Want to Get a Mortgage in Principle?

Well, there are a few reasons.

• Whilst it is not a legally binding document it can give be useful in showing sellers that you are a serious buyer.
• It can help you to get a better mortgage deal. When you have one, you can shop around for the best mortgage deal. You will be able to compare offers from different lenders and choose the one that offers you the best interest rate and terms.
• It can help you to get a mortgage faster. Once you have one, you can start the process of applying for a mortgage. This will speed up the process and will help you to get a mortgage sooner.

How Long Does a Mortgage in Principle Last?

A mortgage Agreement in Principle is usually valid for between 30 and 90 days. In some cases it is possible to renew the terms of the agreement after the 90-day period, otherwise you may have to arrange new terms.

If you are thinking about buying a home, it is a good idea to get a mortgage in principle to enable you to act quickly, and it may give you an advantage over other buyers who are less prepared.