My First Property

What Is A Mortgage In Principle?

When you buy a house, you will in most cases need a mortgage, and particularly as a first time buyer it is almost certain: not many first time buyers have enough savings to buy a house outright!

When it comes to researching mortgages and looking to get a mortgage put in place, one of the terms you will come across is that of a mortgage in principle. You might also hear this described as an agreement in principle or a decision in principle: there are various terms for pretty much the same thing.

But what exactly is a mortgage in principle, and is it different to having the mortgage itself?

The answer is that it is quite different to actually having the mortgage. A mortgage in principle is exactly that - it is in principle, not in reality.

What happens is that the lender will take some information from you, and check your credit score and do a credit search. This will enable it to give you a figure of what it might be able to lend you - very much with the emphasis on this being in principle.

This can be very useful for people as it gives them some feel for what they may and may not be able to get from a lender, and therefore gives a good steer as to what sort of house price bracket you can realistically look at when it comes to buying. If you don't have an agreement in principle for the sum you'll need for your dream house, then it gives a good indication that you might need to cut back on what you look for.

It's important to note that 'in principle' means there is no guarantee over what actual mortgage you'll get offered, and indeed if you'll be offered one. That's because when it comes to making your full mortgage application, things are looked into in a lot more detail which could lead to a different outcome to that of the mortgage in principle.

Some people decide to get a mortgage in principle, whilst others don't. It can depend on various factors. If you have no reason to think you won't get a mortgage for the amount you want, because you've worked out it's a modest multiple of combined income and you have a good credit history perhaps, then you may feel there is no need to do so.

However, for those who have a bad credit history - or simply worry that they might - or are looking for a figure that they think is probably right at the top end of what they can afford, then it might seem a good idea to get an agreement in principle rather than going straight to making a full mortgage application.

Remember we have various tools here at My First Property. For instance, if you want to get an idea of what your repayments would be on a mortgage of a given amount to help with your budgeting and work out how affordable your dream home is, then you can use our easy online Mortgage Payments Calculator where you just enter a few figures and the calculation is done for you.

Last update: 05 Jun 2015

More first-time house buying articles:

  1. Find Houses That Have Dropped In Price
  2. Why you should visit a house at different times of day
  3. Budgeting and Saving Tips
  4. Why Buying in London is Different to Elsewhere
  5. Can I Take Photos When Viewing Property?


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