Mortgage in principle

An MIP is a certificate showing how much you can borrow on your mortgage.

You can take it to property viewings, and use it to show sellers that:

• you’ve done your homework
• you’re serious about buying
• and you can afford to buy

It’s also a good way to reassure yourself, too. Your MIP will give you a sense of whether you can afford to borrow the amount you were hoping for. It’s a rough estimate, and not necessarily a guarantee, but it’s a good first step.

An MIP is different from an agreement in principle (AIP) – here’s more about that.

Lenders and brokers sometimes say “mortgage in principle” and “agreement in principle” like they’re the same thing. Spoiler alert: they’re not.

Both an MIP and AIP are certificates showing what you can borrow. But they happen at different stages and help you in different ways.

Mortgage in principle (MIP)

You usually get an MIP before you’ve found a property, to help you in your search. You can get an MIP from a broker, lender, or even an estate agent’s own broker.

An MIP is the most basic check of what you can realistically borrow. To get one, you need just a few details about your income and deposit. There’s no credit check, and you don’t need to submit any documents to anyone.

An MIP shows sellers that you’re likely to be approved for a mortgage, so it could help you stand out from other buyers when you’re making an offer.

Agreement in principle (AIP)

Usually, you only get an AIP once you’ve found a property you want to buy. You’ll get your AIP from a lender, though a broker can get this on your behalf.

An AIP is a statement from a lender saying they’re happy to lend you a specified amount of money to buy a specific property. You can think of it like the first part of your proper mortgage application.

To get an AIP, you need to answer more questions, send your lender documents, and do a credit check. But the result is a more accurate estimate of what you can borrow, and more certainty that you’ll be approved for a mortgage.

They’re not a promise

Neither an MIP or AIP are a contract. Neither one guarantees you’ll get a mortgage. You’ll still need to go through the full mortgage application process – a far more detailed check of your finances – and you might still be rejected. Not the most cheery thing, we know, but it’s good to be prepared.

They’re not compulsory

You don’t have to get an MIP or AIP. If you find a property you like, you could in theory go straight to a full mortgage application.

The only thing is, you’d need to be extremely confident about what you can afford, because your mortgage application will include a hard credit check.

What an MIP or AIP do is give you a little more certainty before you dive into a full mortgage application. Any glaring problems with your finances, they’ll show up early.

Nope. There’s no credit check needed for a mortgage in principle.

Later on, when it’s time to actually apply for a mortgage, you might have to do a credit check. But you’ll need to give your express consent before that can happen, so it will never be a surprise.

Credit checks: the difference between an MIP and an AIP

Mortgage in principle – no credit check

You’ll have to give a few details about your income, savings, and deposit amount. Then your lender or broker will automatically calculate an estimate of the mortgage you could get. They might ask you about your credit commitments, but they don’t investigate your personal credit history at MIP stage.

Agreement in principle – credit check

When you apply to a lender for an agreement in principle, they’ll check your credit score to see how you’ve managed debt before – and decide how risky it would be for them to lend you money.

If they see you’ve been managing your money well, they’ll be more likely to offer you a mortgage in principle. But if they see lots of missed bills and unpaid debts in your record, that might put them off giving you a mortgage loan.

Credit scores: a quick refresher

A credit report is a record of how you’ve managed your money. It shows things like your debts, whether you’ve paid bills on time, your store cards, where you’ve applied for loans, when you paid those loans back… you get the picture.

It comes with a credit score: that’s all the information in your report, summarised in one number.

Before you apply for an agreement in principle, check your credit report yourself first. You can do this with Experian, Equifax and TransUnion (previously CallCredit) – the agencies who work out your credit score in the UK. They each calculate it a little differently, so it’s worth getting a report from all three.

Once you get it, work through this credit score checklist to make sure your score is as good as it can be before you apply to lenders.

Do credit searches affect my credit rating?

There are two types of credit searches:

• Soft search: a cursory check that won’t affect your credit score
• Hard search: a deeper dive into your credit history, that shows up on your report and might lower your score

For agreements in principle, it’s worth checking if your lender will use a hard or soft search in advance. If they use a hard search, it’ll show up on your record as a full mortgage application. One or two of these won’t affect your score too badly, but several over a short amount of time can really drag it down – as it’ll look like you’ve been rejected many times in a row. Not great.

When it comes to a full mortgage application, lenders need to dig deeper into your finances – that’s almost always a hard search, but one you can’t really avoid.

You can check your own score as often as you like. It won’t affect your credit rating.

If you just want a rough estimate of how much you can borrow, you can get that quickly and easily from either a lender or broker. You can get an MIP from Habito in 5 minutes for free, from this very page.

You won’t need any documents. You’ll just need to know:

• your income
• how much you have in savings
• how much you’d like to put down for a deposit
• the approximate cost of the property you might buy
• some broad estimates about your monthly spending

How to get an agreement in principle

An agreement in principle (AIP) is the next step, after you’ve got an MIP.

Once you’ve found a property you like, you can get an agreement in principle for a mortgage on that specific property.

You’ll need some documents, like proof of ID, proof of address and bank statements. If you have those to hand, you (or your broker) can apply online in 20 minutes. You’ll usually get a decision that same day – it can actually take as little as 15 minutes – with a certificate or written confirmation as proof.

Mortgage in principle: no time limit

Forever, basically. There’s no time stamp on an MIP, though it’s based on the income and deposit you entered when you got it. So if those things change then your MIP won’t be as helpful any more.

Agreement in principle: 30–90 days

Your agreement in principle will last around 30–90 days, depending on the lender. If your circumstances or credit history change in that time (for example, you miss a credit card payment) that will change the validity of your AIP.

If your AIP runs out before you need it, don’t worry. You can always re-apply.

Your next step will be finding a home. That means heading out into the big bad world of property searches and viewings.

Once you’ve found a place you like, it’s time to make an offer. Once the seller accepts your offer, it’s time to get a solicitor and sort your mortgage. As always, we’ll be here to help.

No, a mortgage in principle won’t affect your credit score. That’s because it uses a basic affordability calculation without doing a credit check.

If you’re getting an agreement in principle from a lender, on the other hand, they will do a credit check, but it’s almost always going to be a soft credit check, which won’t affect your credit score.

A mortgage in principle is an indication of what you’d be able to borrow based on your income, outgoings, and a few other bits of information.

Because it’s a basic calculation and a cursory check against common eligibility criteria, it’s not a guarantee that you will be approved for a mortgage for that amount.

An agreement in principle (AIP) uses a little more information and a credit check, so it’s a slightly more reliable indication that you’d be accepted for a mortgage with the lender you’re getting the AIP for that amount, but it’s still not a guarantee!

Once you’re ready to apply, a mortgage expert will go through your situation in detail to make sure that you’re eligible and likely to be accepted for the mortgage you end up going for.

There could be a few reasons why a lender, broker, or online site might not give you a mortgage in principle – for example, if they think you’d fail one or more basic eligibility criteria, or your income or deposit is below a minimum threshold.

If you’ve been prevented from getting an MIP, it’s best to speak to an expert to get advice about your specific situation.