What is a mortgage in principle?

February 22, 2025 by Heidi

Mortgage Advisors

The mortgage application process involves several steps and it can be confusing for those unfamiliar with the industry. That is why so many borrowers choose to get professional guidance from a mortgage advisor who has passed the CeMAP course.

One of the key stages in the application process is the granting of a mortgage in principle by a lender. This is something that is essential to securing a loan and being able to buy your chosen property. Despite its importance however, many borrowers do not actually know what it is. This article will outline the basics of a mortgage in principle, providing a general overview of the subject.

What is a mortgage in principle used for?

One reason for the uncertainty is the fact that the mortgage sector uses several terms to describe the same thing. Alongside a ‘mortgage in principle’, you can also hear about a ‘mortgage promise’, an ‘approval in principle’ or a ‘decision in principle’ – but these terms are very much interchangeable. They all refer to an estimate provided by a lender of how much they are prepared to lend to you.

That sum of money will not be plucked out of thin air, though. A lender will arrive at it following a detailed examination of your finances as well as interest rates. They will need to view data concerning your monthly income and expenses to be able to arrive at a mortgage in principle offer. That is why the submission of documents like bank statements is required during the mortgage application process.

The estimation that the lender arrives at after studying your financial situation will be provided to you in writing. That letter is what a mortgage in principle is, but it is important to bear in mind that it does not constitute a legally binding offer. You will need to successfully complete the entire application process to receive a guaranteed mortgage offer.

At this point, you may be wondering what use a mortgage in principle is if it does not equal a guarantee of anything. In fact, it can be very useful during the buying process. You can show it to the person that you are looking to buy from, as evidence that you will be able to afford the necessary mortgage. That can help to sway things in your favour where there are several potential buyers interested – especially as estate agents take a mortgage in principle seriously.

Indeed, a lot of agents will only regard any offer you make as a serious one if it is accompanied by a mortgage in principle. That is partly because it represents an accurate calculation of what you can afford. However, because a mortgage in principle is the first stage in the application process, it is also considered to be a statement of intent. Therefore, you can use it to prove to buyers and estate agents that you are serious.

Mortgages in principle are used by lenders to determine whether you can afford a loan or not. They are also used by buyers to find out what they can realistically afford. Getting one reduces the risk of being rejected by a lender further down the line. As rejected applications will show up on a credit file, they can make it harder to get a mortgage in the future. So, a mortgage in principle has numerous uses and is well worth pursuing.

How do I get an MIP?

When it comes to getting a mortgage in principle, you have two options; you can apply to a lender yourself or ask a mortgage advisor to do it. There are several reasons why it is a good idea to go with the latter option. For one, a professional advisor will have useful contacts with specialist lenders. That will give you a broader range of loans to choose from.

Another reason to work with an advisor is to save time. They will use their CeMAP training to rapidly identify the best and most affordable mortgage options. Plus, an advisor will know exactly what documentation the lender needs.

Once that documentation has been submitted, the lender will do a soft credit check before giving a decision. Your mortgage in principle will last for a minimum of 30 days and a maximum of 90, with each lender being different.

You are more likely to get a mortgage if you secure a positive decision in principle first. There is no guarantee, but the lender will have greater confidence that you can afford it.

This covers the main points concerning a mortgage in principle, for those thinking of applying.