Mortgage Agreement in Principle

Why is it important?  

Getting a mortgage Agreement in Principle before you start viewing houses can help you secure your mortgage.  

What is a mortgage Agreement in Principle?  

A mortgage Agreement in Principle is a document that shows how much you could borrow for a mortgage. Sellers and lenders may ask for one to prove you can afford the property.

Other names for a Mortgage in Principle include: 

• Agreement in Principle (AIP)  
• Decision in Principle  
• Mortgage in Principle 
• Mortgage promise 

Why do I need one?  

A mortgage agreement in Principle doesn’t guarantee you’ll be accepted for a mortgage. But it can help you understand how much you could borrow. Having one also helps both sellers and lenders see you as a ‘serious’ buyer. And it can help your mortgage application process run a bit more smoothly. 

As a plus, estate agents will really understand your budget. So you can view properties that are in a realistic price range.  

Lisa and Paul’s story  

Lisa and Paul are first time buyers with two children. Lisa earns £25,000, and Paul earns £23,000. They have seen a home they like for £210,000 and are viewing it on Saturday.

They have spoken to one of Principality’s Mortgage Advisors, Kate. With Kate’s support, they have worked out they can borrow up to £215,000, with their £15,000 deposit on top. They have used this information to get a mortgage Agreement in Principle for £218,000.

When they visit the property, they will show the estate agent a mortgage Agreement in Principle from Principality. It will show that the building society would be willing to offer them a mortgage of £218,000 over 25 years. They can also supply a copy of their latest Principality ISA (Individual Savings Account) that holds £15,000 in savings. These two documents would show an estate agent they can move forward with buying the property. It also means if they were to compete with other bids on the property, they know the maximum they can afford.

If their offer is accepted, they can revisit Kate at Principality who can progress their mortgage based on the amount agreed between buyer and seller.