If you’ve searched “mortgage agreement in principle”, you’re probably looking for one of two things:
Confusingly, lenders and brokers sometimes use these two terms as if they refer to the same thing – but they don’t, they’re different!
Here’s what makes them similar - they are both written statements or certificates from a lender, stating how much money they would be prepared to lend, in principle. They aren’t promising to lend that amount, but based on what they know about someone’s finances, an MIP or AIP shows what’s likely.
Let’s take a look at a mortgage in principle (MIP) and an agreement in principle (AIP) separately, so you know which one you need, and how to get it.
What is a mortgage in principle (MIP)?
A mortgage in principle (MIP) is a certificate or written statement from a lender (like a bank or building society), which shows what the lender would, in principle, let you borrow.
Why get a mortgage in principle (MIP)?
An MIP is something that’s useful (but not compulsory) for you to get when you’re just starting your property search. It helps you to:
- Narrow down your property search. An MIP gives an idea of budget, so you can focus your house or flat search on properties you can afford. This can save time and avoids the disappointment of getting your heart set on a property, only to find it’s not in your price range.
- Stand out from other buyers. With an MIP in hand, sellers and estate agents are more likely to treat you as a serious buyer – it acts as proof that you can afford to purchase a property. That could help you stand out from the crowd when you make an offer.
How can you get a mortgage in principle (MIP)?
Getting an MIP from a lender or broker is quick and simple, and you can often do this online. In fact, you can get an MIP for free right here in just 5 minutes. No financial documents needed.
Here’s what we’ll need to know:
- Your income
- A few broad estimates about what you spend each month
- The amount of money you have in savings
- The amount of money you want to use for a deposit
- The approximate cost of the property you’d like to buy
Just fill out the online form with these details and hit the submit button – simple!
FAQs about a mortgage in principle (MIP)
Here are answers to some frequently asked questions about MIPs:
- How long does an MIP last for? There’s no time limit, but remember that it’s based on the income and deposit details you entered. If those change, the MIP won’t be as useful.
- Does an MIP affect your credit score? No, because the lender doesn’t do a credit check when they calculate your MIP. (Note: an AIP does involve a credit check. Ask the lender about this before you apply.)
- Could an MIP be declined? It’s possible that a lender might refuse to give you an MIP, if you don’t have a high enough income or deposit, or if they think you might fail the basic eligibility criteria for a mortgage. If this happens, get in touch with an expert to discuss your next steps.
- Does an MIP guarantee a mortgage? Unfortunately not! It’s only a basic check of how much you can afford to borrow. When you’re applying for your full mortgage, later on, the lender will look into your finances in more detail. That could change the amount of money you’re able to borrow.
So that covers the mortgage in principle (MIP). Let’s move on to its close relative: the agreement in principle (AIP).
What is an agreement in principle (AIP)?
Unlike an MIP, which is a general statement about how much you could afford to borrow, an AIP states that the lender would be willing, in principle, to lend you a certain amount of money for a certain property.
Why get an agreement in principle (AIP)?
It’s useful (but not compulsory) to get an AIP after finding a particular property to buy. It’s helpful for a few reasons:
- It gives a more accurate budget estimate
- It makes a seller more confident that the buyer is serious
- It acts like the first part of a proper mortgage application, because the information and documents needed for an AIP are also needed for a full application
How can you get an agreement in principle (AIP)?
You can get an AIP by contacting a lender, or by using a mortgage broker. You’ll need to answer some more detailed questions about your finances, provide some documents (like ID, proof of address, and bank statements), and agree to a credit check.
An AIP credit check will often be a soft search, which means it won’t leave a footprint on your credit record. But bear in mind, some lenders do carry out a hard search, leaving a trail.
If you apply for multiple AIPs (with multiple hard credit checks) in a short space of time, it can lower your credit score. This is why it’s a good idea to ask the lender what type of check they’ll be running in advance.
Once you’ve got all the documents you need for your AIP, you can apply for it online in 20 minutes. Usually, you’ll find out whether the AIP has been granted on the same day you apply. You’ll be given a certificate or written statement as proof.
FAQs about an agreement in principle (AIP)
Let’s take a look at some frequently asked questions about AIPs:
- How long does an AIP last for? Around 30–90 days, depending on the lender (you can re-apply if it runs out). But a change in your financial situation can make an earlier AIP inaccurate.
- Does an AIP affect your credit score? Yes, but only if the lender does a hard check. A soft check won’t show up on your credit record. Ask your lender which kind of check they will do before you apply for the AIP.
- Could an AIP be declined? Possibly, if the lender doesn’t think you’ll fulfil the basic eligibility criteria for a mortgage, or if your income or deposit isn’t high enough. If this happens to you, get in touch with an expert to discuss what to do next.
- Does an AIP guarantee a mortgage? No, but it gives a more accurate prediction than an MIP, because it’s based on more detailed information about your finances.
MIP vs. AIP: The key differences
Here’s a summary of the key differences between a mortgage in principle (MIP) and an agreement in principle (AIP):
When do you get it?
MIP: At the beginning of your property search.
AIP: Once you’ve found a property you want to buy.
What’s it for?
MIP: Gives you a sense of what kind of property you can afford.
AIP: Shows that you’re likely to be able to get a mortgage for a specific property.
What do you need to provide when you apply?
MIP: Some very basic info about your finances. There’s no credit check.
AIP: More detailed info about your finances and supporting documents. You’ll need to agree to a credit check (usually soft).
How long does it last for?
MIP: No time limit. Might be less accurate if your financial situation changes.
AIP: 30–90 days, depending on the lender, but you can re-apply if it runs out. As with the MIP, it might be less accurate if your financial situation changes.
Next stop: The mortgage
Once you’ve got an AIP and had an offer accepted on your dream home, you’ll be moving on to apply for your full mortgage.
We can help with this too get in touch or start with our mortgage calculator.
Alex decided to become a mortgage broker after he used one to buy his flat. Was he inspired by the amazing service? No. He just figured he could do a much better job. Today, Alex leads one of Habito's biggest teams of brokers, giving people the expert, savvy advice they need to make buying their homes a breeze.