If you’re thinking about buying a home or remortgaging, you may have come across the term Mortgage Agreement in Principle (AIP)—also known as a Mortgage in Principle, Decision in Principle (DIP), or even a Mortgage Promise. But what exactly does it mean, and why is it important?
A Mortgage Agreement in Principle (AIP) is a statement from a mortgage lender indicating how much they may be willing to lend you based on an initial assessment. This is not a full mortgage offer but a useful tool when house hunting, as it shows sellers and estate agents that you are a serious buyer.
What Does a Decision in Principle Mean?
A Decision in Principle (DIP) is another name for an AIP. It essentially means that a lender has reviewed some key financial details and, in principle, is willing to consider lending you a certain amount. However, it is subject to further checks and underwriting.
What Do You Need for an Agreement in Principle?
To obtain an AIP, you will typically need to provide the lender with:
Your personal details (name, date of birth, address history for the last three years)
Your income details (including salary, self-employed earnings, bonuses, or other income)
Your outgoings (such as credit commitments, loans, and regular expenses)
A basic credit check (some lenders perform a soft check, while others may conduct a hard search)
What Happens After an Agreement in Principle?
Once you have an Agreement in Principle, you can confidently start viewing properties, knowing that you have an idea of your borrowing power. However, an AIP does not guarantee you will get a mortgage. When you apply for the mortgage formally, the lender will conduct a more thorough check of your finances, including a full credit check, employment verification, and property valuation.
If you already have an AIP, your next steps include:
Finding a property – Start making offers on homes within your approved budget.
Submitting a full mortgage application – Once an offer is accepted, you'll need to provide detailed documents for final approval.
Receiving a mortgage offer – The lender will issue a formal mortgage offer after completing all checks.
Proceeding to exchange and completion – Your solicitor will handle legal matters, and once the mortgage is finalised, you can move into your new home.
Does an AIP Guarantee a Mortgage?
No, an Agreement in Principle is not a legally binding mortgage offer. It is an indication of what you may be able to borrow, but the lender will still need to perform further assessments before making a final decision.
How Long Does an AIP Last?
Most AIPs are valid for 60 to 90 days, depending on the lender. If it expires before you find a property, you may need to apply for a new one.
What Does a Mortgage Agreement in Principle Look Like?
An AIP is usually a digital or paper document issued by the lender, stating the estimated loan amount they might be willing to offer you. Some estate agents or sellers may request a copy when you make an offer on a property.
Why is an AIP Important When Buying a House?
Having an Agreement in Principle gives you credibility with estate agents and sellers, showing them that you are a serious buyer. It also helps you understand how much you can afford before you begin house hunting.
Final Thoughts
A Mortgage Agreement in Principle is a useful step in the home-buying journey, giving you an early indication of what you may be able to borrow. However, it’s important to remember that it’s not a guarantee of a mortgage. If you’re ready to get an AIP or want expert advice on your mortgage options, Chetwood Lloyd Mortgages can guide you through the process and help you secure the right deal.
If you have questions about Mortgage Agreements in Principle or need assistance in getting one, feel free to contact us today!
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