What is the difference between a mortgage in principle and a mortgage offer?
A mortgage offer is a legal offer made by a lender to a mortgage applicant. It states exactly how much they’re willing to lend you alongside the fees and interest rate. You’ll only get this once you formally apply for a mortgage – and get accepted.
A mortgage in principle, on the other hand, is an estimate of how much the provider thinks you can afford to borrow. Bear in mind, this amount may change slightly once you make a formal application. You’re also not tied to applying with the same company - although you may get offered a different amount by another provider.
What do I need to get a mortgage in principle?
In order to get a mortgage in principle, you will need to provide:
- proof of income – wage slips (or bank statements if you’re self-employed), are usually accepted as proof of income
- previous addresses - the provider will want your address history, normally going back three years. If you have a stable address, this should work in your favour
- credit agreements - you’ll need to provide details of any ongoing credit agreements, so they can assess your affordability
- spending records – this may include utility bills, credit card bills and subscriptions. They’ll use these to decide how much they think you can afford to repay each month
Does it cost to get a mortgage in principle?
No, there isn’t usually any fee for a mortgage in principle – but this may differ depending on the company. There will be fees involved once you formally apply for a mortgage.
How to get a mortgage in principle
Follow these three steps to get a mortgage in principle:
- decide whether you want to apply directly or through a broker – brokers can save you time by searching the best deals for you, but applying directly means you could get the mortgage in principle more quickly
- fill out the information requested – this includes personal details, like your name and date of birth, address history, information about your income, expenditure and current credit agreements
- wait for the lender to contact you – if you’ve given them all the information they need, they’ll be able to provide you with a mortgage in principle
Not all lenders ask for supporting documents for a mortgage in principle. But its important you answer the questions accurately, so you get a realistic quote.
How long does a mortgage in principle take?
How long a mortgage in principle takes depends on the lender – some can decide on the same day, others can take a few days or a week. It also depends on whether you’ve decided to go direct or through a broker because brokers tend to take longer.
How reliable is a mortgage in principle?
While a mortgage in principle is generally considered to reliable, it’s still only an estimation. The amount may differ slightly, depending your circumstances, the lender’s criteria and the size of the deposit you’re putting down.
With that said, you can generally rely on being able to buy a house for a similar amount to your mortgage in principle because companies are often conservative in their estimations. Just remember to factor in a deposit, interest rates and fees into your purchase.
Remember, the figure on your mortgage in principle is not a goal – rather it’s an upper limit. You don’t want to end up overstretching yourself financially by aiming for the house at the top of your limit.
Can you be declined after a mortgage in principle?
Yes, it is possible to be declined after a mortgage in principle because it isn’t legally binding. If you formally apply for a mortgage and information comes to light that shows as a red flag to the lender, (such as recent bankruptcy for example), they can decline your mortgage application.
Does a mortgage in principle affect your credit score?
Whether a mortgage in principle affects your credit score depends on the lender you choose. Some lenders will perform a soft check on your credit file which has no impact. Whereas other lenders perform a hard search which leaves a footprint on your credit report and causes your credit score to temporarily dip.
When you apply for a mortgage in principle you might want to ask whether the lender is going to conduct a soft or hard search to be on the safe side.
Can you view a property without a mortgage in principle?
Estate agents don’t typically ask for a mortgage in principle when you view a property – although some might. It’s more likely that they’ll ask to see it when you want to make an offer in order to check if you’re a serious buyer.
How long does a mortgage in principle last?
A mortgage in principle normally lasts between 60 - 90 days. This depends on the lender, so you might want to consider getting one that lasts longer if you’re in the early stages of house hunting.
They can be renewed, just be aware that the lender may conduct a hard search on your credit history to do this. Renewing a mortgage in principle multiple times can negatively affect your credit score if so.
What happens after a mortgage in principle?
There are ten steps you’ll want to take to find a mortgage after getting a mortgage in principle:
- find the right property for you – you can use websites like Rightmove and Zoopla
- make an offer – try and view the property first to avoid being disappointed
- apply for a mortgage – you can use the company who gave you a mortgage in principle or another firm
- find a solicitor – you’ll want a conveyancing firm to handle legal matters
- arrange a building survey – this ensures that there aren’t any hidden problems with the property – or you can ask for a discount or walk away if you do discover issues
- get building insurance – you legally have to do this before finalising the offer
- finalise the offer – this will be your final offer for the property
- transfer your deposit to your solicitor – they will arrange to send it to the house seller
- exchange contracts – the property is now legally yours and you can’t back out without losing your deposit
- complete – and pick up your keys
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Mortgages are secured against your property. This means your home may be at risk if you fall behind with your mortgage repayments.
Note, the more you borrow and the longer your mortgage term, the more interest you'll pay in total.
Disclaimer: All information and links are correct at the time of publishing.
Adele Kitchen
Personal Finance Writer
Adele is a personal finance writer with more than 10 years in the finance industry behind her. She writes clear and engaging guides on all things loans for Ocean, as well as contributing blogs to help people understand their options when it comes to money.
