Mortgages in Principle vs. Mortgage Offers

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A mortgage decision, in principle, can help you estimate how much you could borrow before you complete a formal mortgage application and receive an official mortgage offer.

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What is a mortgage decision in principle?

When a mortgage lender provides you with a ‘Decision in Principle’ or ‘agreement in principle’, they indicate the amount they will lend you. This information can assist you in seeking properties within your budget and reassure sellers that you are prepared to purchase. To offer you a mortgage in principle, lenders will require some basic information, such as your income and the amount you wish to borrow. They will then generally contact a credit reference agency to perform a credit check on you.

A certificate will be provided if your credit score meets the requirements, indicating the potential amount a lender might lend you. However, it is important to remember that a mortgage, in principle, is not a surety that the lender will offer you a mortgage. Their decision may change, or they may offer you different terms once they have received your complete application and completed their underwriting checks.

How long does a mortgage, in principle, last?

A mortgage agreement, in principle, usually remains valid for 60 to 90 days. However, you may have to reapply if it expires before your requirement. It’s essential to exercise caution while requesting multiple agreements in principle, as frequent credit searches can potentially harm your credit rating.

What is a mortgage offer?

A mortgage offer is a lender’s official confirmation that they will provide you with a mortgage. To receive a mortgage offer, you must complete the full application process and provide all requested information for the lender’s underwriting checks. Additionally, the lender will require a valuation report for the property you want to purchase before issuing the formal mortgage offer.

How long does it take to get a mortgage offer?

The time it takes to receive a mortgage offer depends on factors like the lender you choose, how quickly you provide them with all the necessary information, and the complexity of the purchase. Sometimes lenders require more information, which can cause delays. To avoid this, make sure you have all your paperwork ready. Generally, you can expect to receive your mortgage offer within four weeks of submitting your application if the process goes smoothly.

How long does a mortgage offer last?

Mortgage offers typically last 3-6 months, but the duration can differ depending on the lender. For instance, some lenders’ offers are valid 3 months from the offer date, while others start the clock from the application date. Certain lenders may have specific deadlines for completion.

Ensure you understand when your mortgage offer will begin before applying, as different lenders have different timelines. If you expect a delay in starting your offer and want a fixed rate, consider a product that runs for a specific number of years (like 2 years) instead of until a fixed end date, like 01.01.25. This will ensure that you get the full period of the product.

Some lenders may offer to extend their offer by an additional 3 to 6 months if you are buying a new construction property.

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Frequently Asked Questions

1. What is a mortgage in principle?

A mortgage agreement in principle is the first and important part of the mortgage application process. The mortgage application is divided into two parts. Mortgage in principle A decision in principle (DIP) or acceptance in principle (AIP) both are the same things. Some lenders name it DIP, and some call it AIP.¹

2. What is a mortgage offer?

A mortgage offer is an official confirmation from a lender that it will give you a mortgage for a particular property.²

3. What is the difference between a mortgage in principle and a mortgage offer?

A mortgage in principle is not a guarantee that you will be offered a mortgage. It is an indication of how much you could borrow based on your income, outgoings and other financial commitments. A mortgage offer is an official confirmation from a lender that it will give you a mortgage for a particular property.^2,3

4. How long does a decision in principle last?

A decision in principle usually lasts for between 30 and 90 days.⁴

5. How long does it take to get a mortgage offer after an agreement in principle?

It can take anywhere from 24 hours to several weeks to get a mortgage offer after getting an agreement in principle.³

6. Can you be denied after an agreement in principle?

Yes, you can be denied after an agreement in principle as it is not a guarantee that you will be offered a mortgage.³

7. Is an agreement in principle binding?

No, an agreement in principle is not binding.⁴

8. Can I make an offer on a house without an agreement in principle?

Yes, you can make an offer on a house without an agreement in principle but having one can help show sellers that you’ll be able to afford the property that you want to purchase.²

9. Do I need to have an agreement in principle before making an offer on a house?

No, you do not need to have an agreement in principle before making an offer on a house but having one can help show sellers that you’ll be able to afford the property that you want to purchase.²

10. What happens after I get my mortgage offer?

Once you have your mortgage offer, you can exchange contracts with the seller of the property and agree on a completion date for the sale.²

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