What Is a mortgage in Principle?
A mortgage in principle (MIP) is a written statement from a mortgage lender or broker confirming that - based on a preliminary review of your income and credit profile - they would likely be willing to lend you a specified amount. It shows sellers and estate agents that you have had initial financial checks and are a credible buyer.
It is also called an Agreement in Principle (AIP), Decision in Principle (DIP), or Approval in Principle. These terms all refer to exactly the same thing - different lenders and brokers use different names for the same document.
A mortgage in principle is not a mortgage offer - it is an indication. The lender has not committed to lending you money. The formal offer only comes after a complete application, property valuation, and full underwriting. A MIP can be declined, revised, or withdrawn when the full application reveals different information.
mortgage in Principle vs Formal mortgage Offer
Does a mortgage in Principle Affect Your Credit Score?
This is the most common question - and the answer depends on which type of search the lender uses.
Soft Credit Search
Hard Credit Search
Use a whole-of-market mortgage broker. Most brokers run a single soft search across their panel of lenders rather than individual hard searches at each bank. If going direct to a lender, always ask: "Do you use a soft or hard credit search for the mortgage in principle?" before proceeding.
How to Get a mortgage in Principle - Step by Step
Choose: Broker or Direct Lender?
A mortgage broker gives you a MIP covering multiple lenders with one soft search. Going direct to your bank gives you their products only. For most buyers, a broker is the better starting point.
Gather Your Information
You'll need: annual gross income, employer name and employment type, monthly outgoings and existing debt payments, your deposit amount, and approximate purchase price you're targeting.
Complete the Online Form or Speak to a Broker
Most lenders and brokers have online MIP applications. The form takes 10-20 minutes. Be accurate - if information on the MIP differs from your full application documents, the offer amount may change or the application may be declined.
Receive Your Certificate
A decision is typically instant for online applications or within 24 hours via a broker. You receive a certificate or letter stating the indicative maximum borrowing. This is what you show estate agents.
Use It When Making Offers
Share the MIP with the estate agent when making an offer. Most agents record the lender name and maximum amount on their files.
What Information You Need for a mortgage in Principle
- Personal details: Full name, date of birth, current address (and 3 years of address history), nationality.
- Income: Annual gross salary (or self-employed income), employment status, employer name, length of employment. Joint applicants provide both incomes.
- Financial commitments: Existing loan payments, credit card balances, car finance, student loan deductions, childcare costs.
- Deposit amount: How much you have saved and the source (savings, gifted, sale of another property).
- Property details: Approximate purchase price you're targeting and whether you'll be living in the property or renting it out.
- Credit history self-declaration: Any previous missed payments, CCJs, defaults, or insolvency events. Be truthful - discrepancies between the MIP and full application cause problems.
How Long Does a mortgage in Principle Last?
A mortgage in principle typically remains valid for 60 to 90 days. After expiry:
- If you haven't found a property, simply renew - usually by repeating the same process. If your financial situation hasn't changed, renewal is quick.
- If your circumstances have changed (new job, pay rise, additional debt), the renewed MIP may show a different figure.
- Renewing does not mean restarting from scratch - most brokers can update an expired MIP quickly.
A mortgage in principle can be declined, reduced, or withdrawn after a full application is submitted. This happens when the full application reveals income lower than declared; undisclosed debts or credit issues appear; or the property valuation comes in below the purchase price. Do not assume a MIP means the mortgage is secured. Continue saving, avoid new credit, and do not make major financial changes between MIP and formal offer.
Why Estate Agents Ask for a mortgage in Principle
Estate agents request a mortgage in principle to confirm you are a genuine buyer and to assess how likely your purchase is to complete. A buyer with a MIP from a reputable lender or broker is significantly more credible than one without. In competitive markets, a MIP can be the difference between your offer being accepted and rejected.
You are not legally required to show a MIP to view a property or make an offer. However, in practice, refusing to provide one puts you at a significant disadvantage. Most sellers, advised by their estate agent, will prefer an offer from a MIP-holder over a non-MIP offer at the same price.