A mortgage in principle (MIP) is a certificate from a lender or mortgage broker that states how much you’re likely to be able to borrow as a mortgage. It’s not a guarantee of a mortgage, but it’s a pretty reliable guide to what you can afford.

The best time to get a mortgage in principle is before you look for a property. An MIP shows sellers and estate agents that you’ve done your homework and you’re serious about buying. And it adds credibility to any offer you make.

In some circumstances, particularly in Scotland, you’ll need a mortgage in principle before you can make an offer on a house. Usually, though, they’re not compulsory – just handy.

Our experts have compiled this guide to what you need to know about a mortgage in principle.

How to get a mortgage in principle

You can get a mortgage in principle through a lender or broker (like Habito!). All you’ll need to know is:

• The size of your deposit – how much you’ve got saved as a down payment on a property
• Your annual earnings – from all sources, including salary, rental properties, or benefits
• Your outgoings – including money spent on transport, childcare, living costs, and anything else

With Habito, you won’t need a credit check to get a mortgage in principle, and it’s free. You just answer a few questions about your income and deposit, then download your MIP certificate.

Some other lenders and brokers, though, do include your credit score in the MIP. Ask them before you apply to see if they’ll do a soft or hard check, as too many hard credit checks can affect your credit score.

With most lenders, you’ll get a mortgage in principle in around an hour. Sometimes it can take up to 24 hours. With Habito, you can get yours in less than 10 minutes. Get started here.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Habito is a mortgage broker — we help you understand your options and apply, but the lender makes the final decision on whether to offer you a mortgage.

Mortgage in principle vs agreement in principle

You might see the terms “mortgage in principle” and “agreement in principle” used interchangeably. Confusingly, they’re not the same. They’re actually two different statements that brokers and lenders give you at different stages of the mortgage application process.

• Mortgage in principle (MIP). This happens before you’ve started looking for a property. It’s the statement saying how much you could borrow in principle. It’s not a guarantee or promise but a basic check on how much you’re likely to afford.
• Agreement in principle (AIP). This is also known as a “decision in principle” (or even “mortgage agreement in principle”). You’ll do this after you’ve found your dream property. More detailed than an MIP, it tells you that you can expect to borrow a specific amount for a particular property. It’s still not a guarantee, but you can think of it as the first step in your full mortgage application.

For an agreement in principle, you’ll need:

• More specific details on your deposit, income, and outgoings.
• A credit check. Depending on who gives you the AIP, this can be a soft check or a hard one. Ask which one it is before you go for it, as too many hard credit checks can affect your credit score.
• Details of the specific property. An AIP is based on a particular property, so you’ll need to give your lender or broker information about that property before they can give you your AIP.

How reliable is a mortgage in principle?

A mortgage in principle can be a pretty reliable estimate of what you can borrow. But it’s not a guarantee or a promise of a mortgage – it’s only a basic check, based on the numbers and details you supply. Only a complete mortgage agreement with a legal contract can give you that guarantee.

Still, there are some good reasons to get a mortgage in principle:

• You get reassurance that, on your income and with your deposit, you’re likely to get a mortgage.
• You know what budget you should aim for in your house hunt.
• You can show sellers and estate agents that you’re serious about buying, and you’re in a position to make an offer. In Scotland, it can be challenging to make an offer without a mortgage in principle.
• You kickstart your mortgage application with clarity – and with all the details you’ll need in place already.
• It can be a useful first step before you start house-hunting. With Habito, an MIP is free, low effort, it takes 10 minutes, and you can get one with no credit check. Get your MIP here.
• Your home may be repossessed if you do not keep up repayments on your mortgage.

A mortgage in principle: What can go wrong?

It’s not likely that anything will go wrong with a mortgage in principle. It’s not something you can be rejected from, because you’re not really applying for anything yet – you’re just getting a feel for what you can afford to borrow.

The only annoying thing that could happen is that your MIP might reveal that you’re able to borrow less than you expected. This can be tough to swallow – but it’s better that you know as soon as possible before you’re too far down the road with a real mortgage application.

Will Rhind, mortgage expert at Habito, says: “If you’ve given really accurate details about your deposit, your income and your outgoings, that will make the MIP more reliable. Sometimes people include a bonus or overtime in their income, rather than just their basic salary. Lenders might then need evidence that you’ve had such bonus payments consistently - for example over two years - to accept that’s a reliable income source. This proof will vary depending on how often you get a bonus - whether it’s just once a year or every week, say - but ultimately a lender will want payslips or a P60, or both.”

How long does a mortgage in principle last?

A mortgage in principle lasts forever, in theory. There’s no timestamp on it. But it’s based on your current income, deposit, and spending, so if these things change, it’s a good idea to get an updated MIP.

While an MIP is technically limitless, an AIP – the agreement in principle that shows what you can borrow on a specific property – usually lasts for between 30 and 90 days, depending on the lender. If your circumstances change, you can get another AIP, but remember to ask about a credit check.

What happens after a mortgage in principle?

After you’ve got your mortgage in principle, you’re ready to roll with house-hunting and the rest of your mortgage application.

• Once you’ve found your dream home, you can do an agreement in principle (AIP) if you want. It’s not compulsory, but we recommend it. An AIP can give you a more precise picture of what you can afford before making an offer.
• After making an offer, now’s a good time to get in touch with a solicitor to help you with the next steps towards exchange and completion. Our Habito Plus service can help you with all of the legal work, including property searches, drawing up the contracts, and transferring the money to the seller. No hassle.

A mortgage in principle is your first step towards getting a mortgage. Take 10 minutes and get your MIP today.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Habito is a trading name of Hey Habito Ltd, which is authorised and regulated by the Financial Conduct Authority (FCA).