How reliable is a mortgage in principle?

When it comes to the mortgage application process and buying a house, you can certainly expect the journey not to be a linear one, often coming with many ups and downs throughout. With all of the forms, credit checks and back-and-forths, the process may feel like a bit of a rollercoaster at times.

When dealing with the mortgage application process, you may be feeling left in limbo, worrying if your application will be accepted or not. The fact of the matter is that you simply won’t know if your mortgage application will be accepted or not until a mortgage provider tells you.

However, there is a caveat to this. Say hello to the mortgage in principle. In brief, despite not guaranteeing a mortgage, a mortgage in principle will give you a bit more certainty or reassurance about how much you can borrow before you fully commit to the full mortgage application process.

Getting a mortgage in principle is often one of the first steps in your journey to buying a house. But how reliable is a mortgage in principle, and what does it actually signify? In this article, we will unpack all of these questions and delve deeper into what exactly a mortgage in principle entails.

What is a mortgage in principle?

A mortgage in principle is a preliminary assessment made by a mortgage lender. It will come in the form of a certificate from a mortgage broker or lender, highlighting how much, in principle, you can afford to borrow. Receiving a mortgage in principle shows proof to the homeseller (or estate agents) that you are capable of securing a mortgage, despite having not started the actual mortgage application process. It is important to note that the decision made is based on the information you have provided at the time, and is not legally binding.

If you are a potential homebuyer, this document is a helpful tool, as it will give you a general idea about your borrowing capacity and will allow you to understand if you are eligible for potential mortgage deals.

Before you begin househunting, it may be wise to seek out a mortgage offer in principle beforehand. This will give you an approximate budget idea and will relinquish any properties that may be out of your price range, you can therefore focus on properties within your range. Another reason for getting a mortgage in principle early into your search, is to show any potential sellers or estate agents that you are serious about buying and can afford to do so.

It is important to remember that whilst a mortgage in principle may boost a buyer’s self-confidence, the final mortgage will be based upon a thorough assessment that includes a credit search and property appraisal, as well as additional financial checks. It’s important to note that a mortgage in principle is not a guarantee, but merely the first step in becoming a homeowner.

How is a mortgage in principle obtained?

A mortgage in principle can be obtained in various ways, such as online, over the phone or by visiting the branch of a high street mortgage broker or lender (bank or building society.) In addition to this, a mortgage broker is able to source a mortgage in principle for applicants.

In order to complete the initial checks and receive a mortgage in principle, you will be required to provide personal information. This information required typically includes:

• The applicant/s personal information – date of birth, current address, etc
• Income details
• Current expenditure – Outgoings, credit agreements, etc
• The total amount of savings – How much your deposit will be

During this process it remains vital to be as honest as possible, detailing as much as you can. Through honesty and transparency, the process will become smoother and easier for all involved.

At this point of your mortgage application process, the mortgage in principle itself should be free. The mortgage in principle does not legally bind either party to continue with the mortgage application. In the event of moving forward with said mortgage application, additional supporting documents are likely to be required.

An important point to note is that a mortgage in principle usually only requires a soft credit check, which will not affect your credit rating. However, it is also possible that some lenders could do a hard credit check (especially for a mortgage agreement in principle,) which would leave a footprint on your credit file for other lenders to see. Hard credit checks can affect your credit rating in the future, so it is advisable to be vigilant and think strategically regarding your mortgage in principle requests.

How long does a mortgage in principle last?

In most cases, there isn’t a set time limit on a mortgage in principle, however, some lenders will allow for a time period of 30-90 days from the date it was obtained. So the validity terms really depend on different mortgage lenders.

One important thing to make note of is that the mortgage in principle will only remain valid based on your personal circumstances when you applied. Should your circumstances change, the original mortgage in principle will no longer be a reliable measure of your ability to get a mortgage. If this happens, it is recommended to simply apply for a new mortgage in principle.

What is the next step in the mortgage application process?

Following on from receiving your mortgage in principle, you are able to commence with the property search. Should you make an offer on a property you are interested in, and it is accepted, you would need to apply for a formal mortgage offer.

As discussed previously, a mortgage offer is not guaranteed following a mortgage in principle. However, if all of the checks have been completed sufficiently, the mortgage offer should naturally follow.

The last stage would be the exchange of contracts, followed by the completion stage.

How reliable is a mortgage in principle?

After having discussed what a mortgage in principle is, and what it entails, just how reliable is it?

A mortgage in principle will only be as reliable as the information you provide to a potential mortgage lender. If you are honest and transparent during the process, it will be more likely you will be successful during your mortgage application.

A mortgage in principle offers a reliable indication of what a potential lender would be willing to lend you, based on the information you have provided. It is not a commitment on their part to give you a mortgage of the same value, at a later date.

Eden Hawk – The Mortgage Broker you can trust!

At Eden Hawk, as a leading mortgage broker in South Wales, we have helped countless people with their mortgage applications. When it comes to a mortgage in principle specifically, we have acted on behalf of many clients, sourcing for them with potential lenders.

If you are currently in the process of applying for a mortgage in principle or are looking to do so in the near future, but remain uncertain on what is the best route to take, let us guide you to your desired outcome. We specialise in finding our clients the most suitable mortgage solutions, guiding them through the intricacies of today’s mortgage market.

We are proud to have assisted thousands of clients across the UK, all with one simple goal in mind: to assist as many house buyers and property investors as possible. Helping to plan your financial future.

Our team of experts offer a full range of mortgage services, ranging from full mortgage review services to help to buy mortgages. If you are in need of mortgage services and have any questions or queries, contact us today for a free no-obligation initial consultation. One of our dedicated team will then be in contact ASAP, to discuss your options.