A Mortgage in Principle, or MIP for short, is also known as an Agreement in Principle, Decision in Principle, Mortgage Agreement in Principle, or a Mortgage Promise.
A MIP is a personalised document confirming an amount of money, which a lender believes they would be able to lend you, based on the information you’ve shared at this stage. And even though it isn’t a legal requirement, increasingly agents will ask that you have one.
What is a Mortgage in Principle?
A Mortgage in Principle is specific to you and, together with your deposit, it can give you an indication of the property price range you can search within. You’re not committing to anything. And you can search for your new home with more confidence.
How long does a Mortgage in Principle, or Decision in Principle, last?
A MIP is normally valid for up to 90 days, but this can vary depending on the lender’s policy.
What’s the difference between a Mortgage in Principle and a full mortgage offer?
A Mortgage in Principle is a step closer to a full mortgage offer
That means, when you’ve found your next home and have an offer accepted, you’ll still need to make a full mortgage application before you move to the next stage of the home-buying process. If you have a valid MIP, that lender, or a mortgage broker, might be able to use the information you initially provided to complete some of the mortgage application details. Bear in mind they’ll want to check it’s still correct.
A Mortgage in Principle shows you how much a specific lender is willing to lend to you
A MIP doesn’t guarantee a mortgage loan, as it’s not a mortgage offer. It will confirm how much a lender is willing to lend to you, based on the information you’ve provided.
However, if the lender finds any new information that hasn’t been included in your MIP application which negatively impacts your ability to get a mortgage, that could impact their decision. This could be whether they will give you a mortgage offer, how much they might lend, what the interest rate might be, or what the term of the mortgage is.
Why get a Mortgage in Principle?
Although a MIP isn’t essential to view homes, it’s a very useful document to have. And you will most likely have to go through the MIP as part of any mortgage application once you have had an offer accepted.
A Mortgage in Principle provides the following:
- Reassurance about the outcome of your full mortgage application
If you get a Mortgage in Principle before, or during your property search, you can feel more reassured about the outcome of a full mortgage application. That’s because, as long as there’s been no major change in your situation, or economic factors like interest rates, or the economy more broadly, you’ve already shared a lot of your financial details, and the lender will have checked your credit history.
A MIP is a good indication of your affordability and creditworthiness for a specific amount of money. You’ll have a personalised result showing how much you can borrow. And you’ll be one step closer to a full mortgage offer.
- Credibility with estate agents and sellers
A MIP gives an indication that you can actually afford to buy the home you’re interested in, and so gives 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.
Arranging a MIP also helps to indicate that you’re a committed and serious property hunter.
- Most lenders use a ‘soft credit check’, so there’s no impact on your credit score
As part of getting a MIP, your lender will run a credit check. Don’t worry, they’ll ask for your consent first .Most lenders use a ‘soft credit check’ for a MIP application, which isn’t recorded on your credit score. However, if the lender runs what’s known as a ‘hard check’, it will leave a footprint. And this could impact your credit rating if you apply for several within a short period of time.
When you submit your mortgage application, any soft-footprint, becomes a hard footprint as you have formally applied for credit at this point.
So, it’s best to check with your chosen lender which approach they use.
Getting your Mortgage in Principle
- Find out how much you can borrow
- You could get property viewings faster
- You’re credit rating won’t be affected
- And you’ll be 1 step closer to a mortgage offer
Is the law different in Scotland when it comes to getting a Mortgage in Principle?
The house buying process in Scotland is slightly different, and although it’s still not a legal requirement to have a MIP, it’s even more strongly viewed as an indication of your intentions.
How to get a Mortgage in Principle
As with a full mortgage application, you can either apply through a mortgage broker, or direct with a lender. You can apply for a Mortgage in Principle (powered by Nationwide) here.
What information will you need?
The broker or lender will need basic personal details, as well as information on your income and expenditure.
At this stage, they may not require supporting documents like proof of your income, but it will be useful to have these available so that you can make sure the information you submit for the MIP is aligned to any documents the lender may check later. There will also be some questions on your outgoings, including existing credit commitments and certain household expenditure items. It may be helpful to have some information available to help you here too.
You can find out more about what information you’ll need here.
How long does it take to get a decision on a Mortgage in Principle application?
For most applicants, it takes about 15-20 minutes to fill in the MIP form online., Once submitted the decision from the lender is then generated within seconds.
How much does a Mortgage in Principle cost?
An online MIP will be free, but if you get a MIP from a broker, some may charge for this service. It’s best to check before applying for one.
What can impact a full mortgage application?
Since a MIP isn’t a guarantee that you’ll get a mortgage offer, it’s good to know what factors may impact the lender’s decision when it comes to the full application.
If your personal circumstances change
Any change in your personal circumstance, such as reductions in your income, or increases in your outgoings, may impact how much you can afford to borrow.
For example, if you lose or change your job, take out a personal loan, your family situation, or number of dependents change, or you go on parental leave. These could all affect whether you can get a mortgage.
If the information you’ve provided in the MIP doesn’t align to documentation checked by the lender
If information submitted on your MIP doesn’t align to any proofs, documentation or checks undertaken by the lender it may reduce the amount that you could borrow, change the mortgage term you can take, or it may mean that the lender is no longer able to lend at all.
The lender’s criteria for offering a mortgage on the specific property
Your own circumstances might not change. But the lender’s decision also depends on their own criteria. Such as whether they consider the property you’re interested in to be suitable for them to lend against. Each lender has their own criteria.
For example, some lenders will only approve mortgages on a certain number of properties, within a particular new-build development. Other examples could include, if it’s an unusual building that needs extensive renovation. Or if the property has increased risk factors, like being prone to flood or subsidence.
If you MIP expires and you apply again, you may get a different decision
If your MIP expires and you apply to the same lender again, you may get a different result, even if nothing has changed in your personal circumstance. This may be because the lender has changed some if its underlying risk rules or policies. This may result in you being given a lower borrowing amount, changing the mortgage term, or it may mean that the lender won’t lend at all.
As well as applying for a Mortgage in Principle, you can learn more about mortgages here, and find out how much you could borrow using our Mortgage Calculator.
To summarise
- A Mortgage in Principle (MIP) is specific to you.
Together with your deposit, it will give you an indication of how much you can borrow from a mortgage lender. - A MIP is normally valid for up to 90 days.
- You’ll still need to make a full mortgage application.
But if you get a Mortgage in Principle during your property search, you can feel more reassured about the outcome of a full mortgage application. - A MIP gives you more credibility with estate agents and sellers.
You’ll get an indication that you can actually afford the property you’re interested in. - Most lenders use a ‘soft credit check’ for a MIP application.
This isn’t recorded on your credit score. But it’s best to check with your chosen lender which approach they use. - How long does it take to get a Mortgage in Principle?
For most applicants, it takes about 15-20 minutes to fill in the MIP form online. Once submitted the decision from the lender is then generated within seconds.
Please note: Rightmove is not authorised to give financial advice; the information and opinions provided in these articles are not intended to be financial advice and should not be relied upon when making financial decisions. Please seek advice from a regulated mortgage adviser.