If you are thinking about buying a home for the first time, you will almost certainly come across the term mortgage in principle fairly early on. Estate agents often ask if you have one before they will arrange viewings, and sellers want to see one before they take an offer seriously. But what exactly is it, how do you get one, and is it actually necessary?

What is a mortgage in principle?

A mortgage in principle - also known as an agreement in principle or decision in principle - is a written statement from a lender indicating that, based on the information provided, they would be willing to lend you a certain amount. It is not a formal mortgage offer and it does not guarantee you a mortgage, but it gives you a reliable indication of how much you could borrow.

To produce a mortgage in principle, a lender will ask for some basic information about your income, employment, outgoings, and deposit. They will also carry out a credit check - either a soft search, which does not leave a mark on your credit file, or a hard search, which does. It is worth checking which type of search a lender or broker will run before proceeding.

Is a mortgage in principle the same as a mortgage offer?

No - and this is an important distinction. A mortgage in principle is a preliminary indication based on limited information. A full mortgage offer comes later in the process, after you have found a property, submitted a full application, and had the property valued. The lender will carry out more detailed checks at that stage, including a full assessment of your income and expenditure and a valuation of the property you want to buy.

A mortgage in principle can be withdrawn or revised if the information you provide at the full application stage differs from what was used to produce it - for example if your income is lower than stated, or if issues come up during the credit assessment.

Do I need a mortgage in principle before viewing properties?

Strictly speaking, no - but in practice it is well worth having one before you start making offers. Most estate agents will ask if you have a mortgage in principle when you register with them, and some will not arrange viewings without one. When you make an offer on a property, sellers and their agents will often ask to see it as confirmation that you are a credible buyer who can realistically proceed.

In a competitive market, being able to show a mortgage in principle can make the difference between having an offer accepted and losing a property to another buyer who appears better prepared.

How long does a mortgage in principle last?

Most mortgage in principle certificates are valid for between 60 and 90 days, depending on the lender. If yours expires before you find a property, you can usually renew it - though the lender may run another credit check at that point.

If your circumstances change significantly between getting the mortgage in principle and applying for a full mortgage - for example if you change jobs, take on new debt, or your deposit amount changes - it is worth letting your adviser know, as this may affect what you can borrow.

Does getting a mortgage in principle affect my credit score?

It depends on whether the lender runs a soft search or a hard search. A soft search does not affect your credit score and is not visible to other lenders. A hard search does leave a mark on your file and can be seen by lenders when you apply for credit. Multiple hard searches in a short period can have a negative effect on your score, so it is worth being mindful of how many you allow.

When you work with a mortgage broker, they can typically obtain a mortgage in principle on your behalf using a soft search in the first instance, which protects your credit file while you are still working out which lender to proceed with.

Should I get a mortgage in principle before I know exactly what I want to buy?

Yes - in fact this is the ideal time to do it. Getting a mortgage in principle early on gives you a clear budget to work with when you start looking at properties. It also means that when the right property comes along, you are ready to move quickly rather than scrambling to get your finances in order before someone else makes an offer.

How Aspect Mortgages can help

The team at Aspect Mortgages are independent whole-of-market advisers. We can obtain a mortgage in principle for you quickly and without leaving unnecessary marks on your credit file, and we will make sure the figure is based on an accurate assessment of what you can realistically borrow - not just the maximum a lender might offer on paper.

To get started, call us on 01257 812345 or visit our first time buyer page. We are happy to help whether you are just starting to think about buying or ready to make an offer.