What is a Mortgage Agreement in Principle?
A mortgage Agreement in Principle (AIP) is a statement from a lender saying how much they may be willing to lend you, based on an initial check of your income, outgoings and credit history. Think of it as a lender's first "yes", useful, encouraging, but not yet a promise.
You'll see the same thing called a Decision in Principle (DIP), a Mortgage in Principle (MIP) or a Mortgage Promise, depending on the lender. Despite the different names, they're all exactly the same thing, so if an estate agent asks for a "DIP" and you're holding an "AIP", you're covered.
How do you get an AIP?
Getting an AIP is quick, usually minutes rather than days. You (or your broker) give the lender some basic details:
- Your income and employment details
- Your regular financial commitments, loans, credit cards, childcare and so on
- Your deposit size
- Basic personal details so they can run a credit check
The lender checks these against their lending criteria and, if all is well, issues an AIP certificate showing the amount they'd be prepared to lend in principle. You'll usually need it in writing, that's what estate agents want to see. Not sure what paperwork you'll need for the full application later? Here's the full list of documents required for a mortgage.
Does an AIP affect your credit score?
Usually not. Most lenders run a soft search for an AIP, which you can see on your own credit file but other lenders can't, and it doesn't affect your score. A small number of lenders still run a hard search at AIP stage, which does leave a footprint, and several hard searches in a short space of time can drag your score down.
This is one of the quiet advantages of using a broker: we know which lenders soft-search and which don't, so your credit file stays clean while you shop around. If you haven't checked your own report recently, here's how to check your credit report for free.
How long does an AIP last?
Most AIPs are valid for 30 to 90 days, depending on the lender. That's normally plenty of time to find a property. If yours expires before you've had an offer accepted, it's not a problem, an AIP can usually be refreshed in minutes, though the lender may re-run their checks.
The important caveat: an AIP is not a mortgage offer
An AIP is a provisional decision based on limited information. It is not a guarantee you'll get a mortgage, or that you'll get it on those exact terms. The full application that follows involves much more scrutiny:
- Document checks, payslips, bank statements and ID have to back up what was keyed in at AIP stage
- A hard credit search, a deeper look at your credit history
- A property valuation, the lender checks the home itself is suitable security
People can and do get declined after an AIP, usually because the paperwork didn't match the details entered, something showed up on the full search, or the property didn't meet criteria. It's why the details need to be right first time, and it's where the full mortgage application process comes in.
When should you get an AIP?
Before you start viewing seriously. An AIP tells you your realistic price range, so you're not falling in love with homes you can't buy, and many estate agents now ask to see one before they'll put your offer forward. In a competitive market, being able to produce an AIP on the spot puts you ahead of buyers who can't.
AIP vs mortgage offer: what's the difference?
In short: an AIP is the lender saying "based on what you've told us, we'd probably lend you this much." A mortgage offer is the lender saying "we've checked everything, your documents, your credit file and the property, and we will lend you this much on these terms." The offer is the document your solicitor needs before you can exchange contracts. The AIP is simply the first step on the way there.
Why get your AIP through a broker?
You can get an AIP directly from any lender's website, but each lender only checks you against their own criteria. Fail one lender's affordability check and you might comfortably pass another's; lenders differ widely on self-employed income, overtime, bonuses, benefits and recent credit blips. As a whole-of-market brokerage, we place you with the lender most likely to say yes, at AIP stage and at full application, rather than the first one you happened to try. And because we know which lenders soft-search, your credit score stays protected while we do it.