How Long Does a Mortgage in Principle Last?

couple looking for mortgage in principle online

The mortgage market is currently fast-changing and it can be frustrating trying to understand when you should be applying for a mortgage in principle and what you need to do after you have one. It can be an agonising decision to decide whether to hold off applying for a mortgage with the hope that rates will fall, especially as some lenders are moving rates quickly.

The good news is that a mortgage in principle is valid for long enough that it should afford you the peace of mind you are getting the best mortgage rate and able to get some traction on your home-buying dreams.

Let’s explore what a mortgage in principle is, how long it lasts and what you need to know about getting one in the current mortgage market.

What is a Mortgage in Principle?

A mortgage in principle is a provisional mortgage agreement. You can think of it like a provisional driving license as it allows you to make offers on properties, but you will need to pass your test – in this case, a full mortgage application before buying the house.

A mortgage in principle is a certificate that simply states, subject to a full mortgage application, you will be able to borrow money with a specific lender.

Different lenders and brokers have varying terms for a mortgage in principle, and you may find your documentation calls it a ‘decision in principle’ or an ‘agreement in principle’ instead.

There are also acronyms for all the above – just in case your lender or broker likes using jargon:

  • Mortgage in Principle – MiP
  • Decision in Principle – DiP
  • Agreement in Principle – AiP

The key is that all of these terms are synonymous and are interchangeably used by brokers and lenders across the mortgage market.

Difference Between a Mortgage in Principle and a Mortgage Offer

Once you have made an offer on a property using your mortgage in principle, a full mortgage application will need to be submitted.

A full mortgage application will be your opportunity to provide proof of income to a lender to acquire your mortgage in principle. For example, if you told the lender that you earn £50,000 per annum, you will need to provide bank statements and payslips or Tax Calculations and Tax Year Overviews to reflect this. A whole-of-market broker, like Boon Brokers, can correspond with the lender on your behalf.

If your mortgage application is successful, the lender will issue a mortgage offer. This offer will be passed to your conveyancers and the property contracts can be signed by both parties in anticipation of an exchange and completion on the property.

In this respect, a mortgage in principle is a first step on the mortgage journey and does not guarantee a mortgage offer. Only after a successful mortgage application is a formal mortgage offer granted by the lender.

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When Should I Get a Mortgage in Principle?

Most estate agents like to filter out people without the means to purchase a property before arranging viewings and accepting offers.

To do this, estate agents normally request a mortgage in principle or if you are a cash buyer, they may in some cases request proof of funds.

Because of this, you should always have a mortgage in principle ready before you start looking at properties in person.

It is important to note that not all estate agents care about having a mortgage in principle, but if you are looking at more than one property you will probably find differences between how each estate agent processes viewings.

In fact, in rare cases, you might not need a mortgage in principle at all. You could in rare cases find a property, make an offer, and then proceed to a full mortgage application without getting a mortgage in principle. There is a risk of doing this though as you will not know with any certainty that the mortgage lender will allow you to borrow money.

How Long Does It Last?

Mortgages in principle have no universal set time limit. Each lender has different rules around their mortgages in principle and you should ask your broker if you are concerned that your property search may take longer than expected.

Typically, most mortgage in principles are valid for around three months. However, most lenders reserve the right to cancel a mortgage in principle at any time, especially if the Bank of England increases the base rate and nullifies your affordability calculation.

For example, if you have obtained a mortgage in principle to your maximum borrowing capacity and the Bank of England increases the base rate, you may not be able to pass the same affordability calculation anymore with the higher mortgage payments.

How to Get a Mortgage in Principle?

The best practice for obtaining a mortgage in principle is through a mortgage broker. Mortgage brokers will take time to understand your financial situation and then find the best lender for your individual circumstances.

Mortgage brokers will then present your options to you which might include a handful of lenders, highlighting the pros and cons of each. Overall, a mortgage broker will also be able to point you in the direction of the cheapest mortgage product or the lender that will allow you to borrow most. Mortgage advice from an expert broker is often invaluable as there are so many considerations when selecting a mortgage product.

Once you have identified a particular lender who is best for your mortgage, your broker will be able to process a mortgage in principle for you and email (or in some cases post) the certificate to you. Some lenders use online mortgage in principle systems now that automatically expire when the product changes or the time runs out on them.

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What Do I Need for a Mortgage in Principle?

You will need three basic pieces of information to obtain a mortgage in principle:

  • Details about your income
  • Details about all your expenditure
  • How much you are looking to borrow

Your broker will provide this information to the lender and providing this information matches the lender’s mortgage requirements, they will then ask to complete a credit check.

Most lenders use soft credit checks to complete mortgages in principle. Soft credit checks do not impact your credit score. Some lenders may use a hard credit check, your mortgage broker will advise you on which type of credit check is being used.

The credit check is the final piece of the mortgage in principle jigsaw puzzle, and providing you pass this, you will be issued the mortgage in principle.

Speak to a Specialist

Obtaining a mortgage in principle is fairly straightforward, but there is a significant difference between simply getting one and having a mortgage in principle that is best for your circumstances and gives a good chance of a successful full mortgage application.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Brokerage. Boon Brokers provides fee-free mortgage advice.

Contact Boon Brokers to arrange your mortgage in principle today.

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.