Mortgage in Principle (AIP) Explained

Understanding your mortgage options is one of the most important first steps when looking to buy a home. Whether you’re a first-time buyer or moving home, a mortgage in principle (AIP) can help provide clarity in what is often a complex and fast-paced property market. In this guide, we’ll explain what a mortgage in principle (AIP) is, why it matters, how it can support your property search, and what steps are involved in obtaining one.

What is a Mortgage in Principle (AIP)?

A mortgage in principle, also referred to as an agreement in principle (AIP) or decision in principle (DIP), is a statement from a lender that indicates how much they might be willing to lend to you based on preliminary information. It is not a guarantee of a mortgage, but rather an indication that, based on your circumstances, you could be eligible to borrow a certain amount.

The mortgage in principle is based on a soft credit check and the personal and financial details you provide. It typically lasts for 30 to 90 days and can be renewed if needed.

Key Features of a Mortgage in Principle

There are several components and characteristics to be aware of when considering a mortgage in principle:

Not a formal mortgage offer: It is a preliminary indication, not a binding agreement.
Validity: Usually valid for between 30 and 90 days.
Credit checks: Often involves a soft credit check, which doesn’t affect your credit score.
Personalised: Based on your income, outgoings, credit history, and other financial information.

Why Is a Mortgage in Principle Important?

Having a mortgage in principle can be useful for several reasons, especially during the early stages of buying a property:

Gives You a Clear Budget

It helps you understand how much you might be able to borrow, so you can search for properties within your estimated price range. This can save you time and help manage expectations.

Shows Sellers You Are a Serious Buyer

Estate agents and sellers often look more favourably on buyers who have a mortgage in principle. It demonstrates that you have taken steps toward securing finance and may be more prepared to move forward with a purchase.

Speeds Up the Process

Having a mortgage in principle in place can make certain parts of the buying process more efficient. It can help when placing offers and may reduce delays in the mortgage application stage later on.

How Does a Mortgage in Principle Work?

To obtain a mortgage in principle, you’ll need to provide information to a lender or mortgage adviser. This includes:

Personal details (such as your name, address history, and date of birth)
Employment status and income
Monthly outgoings and existing financial commitments
Estimated deposit amount

Once submitted, the lender will carry out a soft credit check and assess your affordability. If approved, you’ll receive a document confirming the amount you might be able to borrow. This can usually be issued within a few hours to a couple of days, depending on the lender and the complexity of your financial situation.

The Difference Between a Mortgage in Principle and a Mortgage Offer

It’s essential to distinguish between a mortgage in principle and a mortgage offer:

Mortgage in Principle (AIP): An initial indication based on limited financial information and a soft credit check. Not legally binding.
Mortgage Offer: A formal offer made by a lender after a full mortgage application, processing of documents, and a hard credit check. Legally binding for a set period.

Think of the AIP as the first step in the mortgage process. It gives you an idea of what you might be able to borrow and can support your property search, while the mortgage offer comes after thorough assessments and is used to complete the purchase.

What Information Is Needed for a Mortgage in Principle?

When applying for a mortgage in principle, it’s helpful to have the following information ready:

Proof of identity – such as a passport or driving licence
Address history for the last three years
Details of your income (payslips, P60, or accounts if you’re self-employed)
Details of regular outgoings and financial commitments (loans, credit cards, childcare)
Estimated deposit and source of funds

While the AIP doesn’t require all the documents needed for a full mortgage application, the more accurate the information you provide, the more reliable the result.

Does a Mortgage in Principle Affect Your Credit Score?

In most cases, no. Most lenders and mortgage brokers will perform a soft credit check when issuing a mortgage in principle. A soft check does not leave a footprint on your credit file that’s visible to other lenders and does not impact your score.

However, in some cases, a lender may conduct a hard credit check, which is visible to other credit providers and may affect your credit score, particularly if several checks are done over a short period. It’s worth checking what type of check will be carried out before proceeding.

How Long Does a Mortgage in Principle Last?

The validity of a mortgage in principle typically ranges between 30 and 90 days, depending on the lender. This window gives you time to view properties and make offers. If your circumstances remain the same and your AIP expires, it can usually be renewed without much difficulty.

Can a Mortgage in Principle Be Declined Later?

Yes, it’s possible to be declined for a full mortgage even if you have an AIP. This can happen if:

Your financial circumstances change
A hard credit check reveals issues not picked up by the soft check
The property does not meet the lender’s criteria (e.g., construction type, valuation issues)
Further documentation reveals a different financial picture

That’s why it’s essential to be as accurate as possible when submitting information for a mortgage in principle. A mortgage adviser can help you understand what is expected and review your situation before an application is made.

Can You Get More Than One AIP?

Yes, it is possible to obtain more than one AIP from different lenders, especially if you’re exploring options. However, be mindful of the number and type of credit checks performed. Too many hard credit checks in a short period can affect your credit score. A mortgage adviser can help guide you through this in a way that protects your credit standing as much as possible.

A Mortgage in Principle as Part of the Home Buying Journey

Understanding where a mortgage in principle fits into the property-buying process can be helpful when planning your next steps. Here’s a simplified overview:

Review your financial situation and discuss your needs with a mortgage adviser
Obtain a mortgage in principle
Start house hunting with a realistic budget
Make an offer on a property
Once accepted, submit a full mortgage application
The lender assesses your application and property
If approved, you receive a mortgage offer
Exchange contracts and complete your purchase

The mortgage in principle serves as an early milestone that can support and inform your house-hunting efforts. It helps you approach the process with more direction and understanding.

What Happens After You Get a Mortgage in Principle?

After receiving a mortgage in principle, you can use it when dealing with estate agents and sellers to show you are a serious buyer. You can also use it to narrow your property search based on budget. Once you find a property you wish to purchase and have your offer accepted, the next step is to begin the full mortgage application process.

At this stage, you’ll need to provide more detailed documents, including:

Proof of income (e.g. payslips, tax returns)
Bank statements for a specified number of months
Proof of deposit
Identification and address verification
Details of the property and sales agreement

How Accurate Is a Mortgage in Principle?

An AIP is only as accurate as the information provided. Since lenders typically rely on the income, expenses, and credit details you supply, any inaccuracies could lead to a different result once a full application is submitted. It’s important to ensure all information is as truthful and up-to-date as possible to minimise surprises later in the process.

Does Every Buyer Need a Mortgage in Principle?

While it’s not a legal requirement, a mortgage in principle is often recommended. It supports your property search, can offer a better understanding of your borrowing ability, and may give you a competitive edge when making offers, especially in highly competitive areas.

Buyers who are confident in their financial position may choose to proceed without one, but for many, it can be a useful step in the buying journey.

Final Thoughts on Mortgage in Principle (AIP)

A mortgage in principle (AIP) is a valuable tool when entering the mortgage and property buying process. It provides clarity, helps set expectations around budget, and can support your application when making offers on properties. Although it doesn’t guarantee a mortgage offer, it acts as a useful starting point in your journey towards homeownership.

A mortgage adviser can help guide you through the process of obtaining a mortgage in principle by evaluating your financial position and helping you understand your options. Each lender has different criteria, and working through these requirements carefully can help you feel more prepared for the next steps.

It’s important to remember that an AIP is just one piece of the puzzle. It should be used in conjunction with professional guidance, thorough planning, and an understanding of how mortgages work more broadly.