A Mortgage in Principle (MIP), also commonly referred to as a Decision in Principle (DIP) or Agreement in Principle (AIP), is a pre-agreement from the mortgage lender stating how much they will be prepared to lend you. It is not binding and should not be confused with a mortgage offer, but it will give you a strong indication of what you will be able to borrow to purchase a property.
Why do I need a Mortgage in Principle?
Once you know how much you are likely to be able to borrow, you will then know what kind of properties you can start looking for. Sometimes you might be able to borrow much more than you think which means you can expand your search, or alternatively you might be overestimating your budget and need to scale back.
Estate agents will often ask if you have a Mortgage in Principle when viewing and offering on properties, especially at the moment while demand for houses is so high. Having a MIP shows that you are serious about buying and are fully prepared to have your offer accepted.
Having a Mortgage in Principle, knowing what you can borrow, could save you time and stress when it comes to the formal mortgage application process. If you apply for a mortgage that is higher than what you are able to borrow, you will be rejected and have to reapply, which adds time to the process.
When should I get a Mortgage in Principle?
As soon as you decide that you want to seriously start house-hunting, see a mortgage advisor! They will collect all the relevant information and documents, assess your affordability, and get your mortgage agreed in principle! An MIP typically lasts for 3 months, so there is no harm in getting one agreed before you start viewing properties. That way, you are ready to offer as soon as you find your dream house!
What do I need for a MIP?
The documents needed for a Mortgage in Principle will vary depending on your circumstances, but your advisor will typically ask for:
- Proof of ID
- Proof of address, including details of any addresses you’ve lived at during the last 3 years
- Full credit report
- Latest 3 months’ payslips if you’re employed / Latest 3 year’s Tax Calculations and Tax Year Overviews if you’re self-employed
- Proof of your deposit funds
- Latest 3 months’ bank statements showing income and expenditure
You may be wondering why you can’t just skip the Mortgage in Principle and go straight into a mortgage application. Well, having a MIP allows you to house-hunt with confidence knowing that you’re looking at the right properties and have that pre-agreement in place. It should also make the formal mortgage application process much smoother and less stressful, which is what we all want!
Book an appointment with one of our advisors to get your mortgage agreed in principle and start house hunting!!