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Mortgage in principle

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 21, 2023

Mortgage in principle

This guide will help you learn how to get a mortgage agreement (AIP) mortgage in principle. What is an AIP? How does it work? And should you apply for full mortgage approval before getting one? This article will explain everything!

To apply for a mortgage agreement, enquire today. You will speak with a mortgage broker for free mortgage advice. We will use your information to help find the right advisor and refer you to them for a mortgage in principle agreement.

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What is a mortgage in principle agreement?

An agreement in principle refers to a tentative agreement that a mortgage provider makes to lend you money based on an initial assessment of your circumstances. This could include your income and outgoings. It can also include your credit check score. You can also refer to it as a decision-in-principle (DIP) or approval in principle. It is also known as a mortgage promise.

Every application is subject to the status of the lender and their lending criteria. However, once the AIP has been provided to you, it confirms that they are happy to lend you the money (provided the information you have given is correct).

Agents might request proof of the principle mortgage to prove that you are serious about purchasing a property. If required, your advisor can send a copy of the mortgage in principle to you and your estate agent.

Why should you get an agreement in principle (AIP)?

An agreement, in principle, is a good idea before you purchase a property you can get from your bank or building society.

  • You already know that you can borrow money to purchase the item.
  • This gives vendors and agents confidence that you are credible and can obtain the financing to purchase the property.
  • This can help you negotiate better – most vendors will accept your offer more than someone who has not decided in principle.
  • You will get a mortgage agreement in principle that gives you an idea of the price range you should consider when looking for a loan. It will also tell you what deposit you need, your interest rates, monthly payments, what you can borrow and your limits.

Enquire today to begin a mortgage application process.


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Credit checking and mortgage decisions in principle

Before you decide on principle, there is an important point to remember. After a mortgage request has been processed, subsequent credit check searches made by the lender may leave a credit file with either a soft footprint’ or ‘a hard footprint’.

Even if your credit rating is a 9, don’t expect every mortgage lender will want to lend money to you. Each provider will have its own eligibility criteria and affordability requirements. Many factors can influence the acceptance of underwriters’ opinions, such as employment type, duration, affordability and deposit sources.

It is important to contact the right lender at the beginning. It is best to limit how many mortgages in principle agreements you apply. It is important to be sure that you have a chance of being accepted by providers before you approach them. You can find an experienced broker who deeply understands the market.

Credit checks for agreements in principle

There is a difference between soft and hard credit checks. Each lender refers to your credit file differently. Some lenders perform “soft searches” while others do “hard searches”. Why? We don’t know why! It’s true.

Searches for an agreement in principle

Soft checks performed before the agreement in the principle stage are considered an inquiry or a reference but not a credit application. The check you make online will be viewed as an inquiry. You can monitor your credit file without worrying about your credit score.

Searches for hard credit to obtain an agreement in principle

Hard credit checks are a sign that a mortgage application has been submitted. Too many applications in a short period can hurt your credit score. Some lenders may assume that previous lenders have declined customers or that they are more likely to be fraudulent. They might then try multiple lenders until the application sticks. Mortgage applications at the principal decision stage can be either soft or difficult, depending on the lender. However, almost all lenders will conduct a hard search when it comes to the full mortgage application.


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How to obtain a mortgage in principle agreement

You can apply directly to a lender to get a principle agreement or through a broker. This is the best option, as you don’t have to choose one option and can receive independent mortgage advice about all possible options.

You can only access a few products by going directly to the provider. There is a good chance that you can find a better deal or a more suitable deal elsewhere. If you don’t meet the criteria, you may not be accepted. The lender might not be able to offer you an alternative loan product, so they may not be able to help you further.

But, just because one lender declines you doesn’t mean there aren’t other mortgages available. Our network’s best advisors and brokers have an in-depth knowledge of the market and are familiar with the criteria for lenders.

A whole-of-market, independent broker like the ones we work with will know which lenders are most likely to accept you and be able to provide you with the best deals from all providers.

Information that you will need

Your mortgage advisor will first need to conduct a thorough fact find. This will help them determine the best way to research mortgage lenders.

It is not enough to apply with the provider that offers the lowest rate. Lending criteria these days can be very complex. Approval can depend on many factors such as:

  • Salary
  • Rating credit
  • Current debts
  • Source and deposit amount
  • Type of property
  • Your age

How you work can affect this – full-time employees are less likely to be sued than self-employed workers with unstable or complex incomes.

You must not only find the right mortgage lenders to review your application but also provide the information to your advisor so that they can recommend the most suitable products.

A 5-year fixed rate mortgage will not be recommended if you plan to sell your property within three years. If you have an adverse credit history in the past two years, it is sensible to seek out a lender that will consider your recent adverse credit. Your advisor won’t be able to make the right recommendations if they don’t have these conversations.

Offline AIP Form: To make an application in principle for an agreement, you can submit an enquiry.


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Proof of your mortgage in principle decision

Mortgage lenders will permit you to request a mortgage agreement certificate in principle to prove a decision in principle.

These can sometimes show you the maximum loan amount to know your borrowing limits. Other times, it will state that the loan amount has been approved. Sometimes it will simply say that you have been accepted.

This can be used to prove to vendors and estate agents that you are likely to get the financing you need to buy the property.


What documents do I need to make an agreement in principle?

Before they can offer you a principle agreement, your advisor must verify your identity and salary.

This is in addition to what the mortgage lender will ask for to ensure that the right provider has been approached. It is difficult to determine the exact circumstances and source the right lender without all the relevant evidence. This is especially true when it comes time to prove income. Your mortgage advisor will need exact figures to input on the mortgage lender’s system from payslips/self-employed accounts.

In most cases, the following documents are required to get an agreement in principle.

  • Photo ID (must be current and valid): Passport/driving licence
  • Documents that prove address (Must be within three months): Utility bill or council tax. Mortgage statement.
  • Income proof: Payslips 3 months or 13 week
  • Accounts for self-employed: Tax returns SA302 – last three year
  • Three months of bank statements are required to prove proof of outgoings
  • Deposit proof: A statement from your savings account or a relative’s letter confirming that the gift was received.
  • Credit reports (If adverse credit is declared): Equifax, Call Credit, Experian
  • Information about the property: Address, Type (flat/house etc.), No. A number of bedrooms, other rooms, Materials and Year of construction, Is it a garage/parking?
  • Estate agent details: Contact name, address & number
  • Solicitor details: Contact name, address & number

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What are the AIP decisions of mortgage lenders?

The principal basis for approving you for a mortgage loan is a variety of factors. We’ll go into more detail in this section.

They will also be looking at your credit history, salary in relation to the loan amount, equity or deposit in the property, and affordability.

Loan-to-value (LTV)

The LTV is simply a measure of how likely the lender will not get all their money back if the property is repossessed. You will pay more interest if you borrow at a higher LTV. This is because your credit history and credit score are likely better than someone with a larger deposit.

LTI (Loan to Income)

The typical mortgage provider will either use an income multiple-based or affordability-based model. However, the maximum borrowing limit is 4.5x an annual salary. Some lenders will extend x5 and x6 loans. Lenders are more likely to approve you for a loan if you have a higher LTI.

Negative credit

There are specialist lenders that can help you if you have bad credit. The severity of your credit issue and the date it occurred will determine if you can find a lender.

A higher deposit is better for lenders. This will increase the likelihood that a lender will approve your mortgage at a favourable rate.


To assess your ability to repay, employed applicants will need to show proof of their annual salary, as well as any other income, such as commission, overtime and car allowance. Our standalone guide explains calculating the commission income required for a mortgage.

Lenders also consider how long you have been with your current employer and in your current job. Employers who have been with a company for a long time are more likely to be successful than employees who just started.

Many lenders require that the applicant has been employed for at least six months to be eligible for a mortgage. Some lenders will consider applicants who have recently started a new job, regardless of whether they are in a probationary period or with a contract that is not due for the next three months.

You can apply for a self-employed mortgage with only one year of accounts. However, most lenders require at least three years. Some lenders will require an average of the last three years. There are self-employed mortgages with only two years of accounts. A few mortgage providers will accept applications based solely on the most recent years.


Most mortgage lenders consider the source of your deposit to be an important aspect. The rules surrounding evidencing the origin of the money are strict and must conform with money laundering regulations.

Anybody who has saved their deposit can use it without any problems. However, if the deposit is in an overseas account, only a few lenders will allow this. Self-employed can withdraw funds from their business accounts. However, the accountant must verify that this does not affect the ability of the business trade.

Anybody receiving a gift deposit must prove the source of the funds to the lender or solicitor.

Although it can be difficult to prove that gifted funds were received overseas, some mortgage lenders will accept this. Gifting money to someone outside of the immediate family will require further scrutiny. Although most providers won’t accept gifts from outside the family, some do.


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Multiple applicants

Both incomes will be considered for applications that have two people applying jointly. Most lenders require married applicants to apply for a mortgage in their names. However, some lenders will consider solely married applicants in certain situations.

How many people are allowed to be on a mortgage? While three or more borrowers may appear on a group purchase application or remortgage request, most providers only consider the salaries of the first two applicants in their affordability analysis.

A principle agreement does not guarantee a mortgage

It is sometimes called a “mortgage promise”, but a decision in principle online does not guarantee the funds. The lender’s system has approved your application at this point. You will need to produce still the documents necessary to verify the numbers you’ve been approved on. Also, the lender’s underwriting team must assess your application and sign it off.

When you are certain the lender will give you the money, the formal mortgage offer is not issued until you have submitted a local surveyor has approved the complete application and your property.

Isn’t that a little pointless in principle?

Yes, but you’ll still need to be approved by the lender to receive the funds.

Acceptance is a sign that your application will be accepted. Good brokers understand that cases must be packaged and professionally presented to lenders, especially when there are adverse credit issues or other unusual circumstances.

You can’t set anything in stone until you have received the mortgage offer, the funds released to your solicitor, and have the keys. To confirm that your offer to purchase is valid, you will need a certificate from the estate agent.

Some factors can lead to a mortgage not being granted after you have reached an agreement in principle.

  • Incorrect details (e.g. Address history is incorrect, which can lead to an incorrect credit score
  • If you are unable to provide the requested documents (e.g. If the lender requests business accounts from qualified accountants to verify your income and you do not have one,
  • If your credit report has shown any changes since the original agreement in principle was made (e.g. Payment history was excellent before the application but missed payments after the initial decision and mortgage offer
  • The underwriters decline the application (e.g. They decide that they are unhappy with current account conduct, which indicates high overdrafts and inability live within their means.
  • The property is not suitable for lending. This could be because it is nonstandard construction or it may be that the lender with which you signed the initial principle agreement doesn’t accept it. It may also be due to the property’s value being lower than the price you applied for. Or it could be due to structural problems that make the lender doubt its suitability as security.

You must give accurate information when you are contacting a broker about mortgage assistance. Your broker will use the information you provide to search the market for the best lender for you. This will also help you to avoid any surprises down the road that could cause problems with your application or lead to a decline by a lender.

Your broker will do everything possible to find you the best lender, but the underwriters make the final lending decisions. It is important to understand the whole story so they can match you with the right lender.


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What to do when an agreement in principle is rejected

Don’t despair if your mortgage has been declined since the agreement in principle or before. We’re here for you.

This could be due to many reasons. Each lender will accept your application differently. Every lender will evaluate borrowers individually regarding credit history, credit score and income.

Send us an enquiry, and we’ll make sure that you get connected to the best whole-of-market brokerage, who has extensive knowledge and experience in helping customers in similar situations and deals with enquiries like yours every day.

Is your agreement in principle referred?

Sometimes, a mortgage application will be returned with a message stating that the decision in principle was referred. This means that the lender has referred the mortgage application. It could be because the application is not within the normal, acceptable policy or was incorrectly keyed.

A frontline underwriter will review a referral case 99% of the time. The underwriter will then make a manual decision about lending. This can take anywhere from 1 to 5 days, depending on the workload of the mortgage provider.

Sometimes, all you need is a quick explanation of something minor. Or maybe more information is required to make a decision (i.e. Sometimes, all that is needed is a quick clarification of something minor or more information to reach a decision (i.e. Sometimes, the underwriters may still reject the application. They will often look for reasons not lending and not lending reasons.

If the case is denied, your broker should immediately follow up with a call to the processing department to determine the reason. Finding a reasonable explanation and getting the mortgage approved quickly is possible. There could have been an application keying error or a technical problem with the mortgage system.


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What is the average length of a mortgage in principle agreement?

It takes time to reach an agreement in principle. Many factors can affect this. However, for many borrowers, it can be an instant decision.

The limiting factors are usually:

  1. Collect all necessary documents to enable the advisor to verify income, identification, etc.
  2. Find the right lender to suit your needs. It is possible to apply quickly if you have a clean credit record, are a borrower with a 4.5x income, a loan amount under 85%, or are employed.

Approvals, in principle, are possible within minutes of receipt of a request made in the most simple of circumstances.

Anyone not considered a standard borrower, such as those with bad credit, may have to wait longer for the agreement in principle to be approved. This is because it takes longer to find the best mortgage provider.

Enquire today if time is critical and you require a fast mortgage.

Express service is free, and there are no additional charges. However, because time is precious, we will do our best to ensure you get your express service as quickly as possible.

You can get a decision in principle if you have all of the information and documents outlined above. This is possible for complex applications that take 24 hours.

What is the cost of a mortgage in principle decision?

Each mortgage broker charges different fees. Some charge upfront fees and others charge back-end fees.

It is common for advisors to meet with you at no cost to help you decide what you want and to determine if it’s possible.

What is the average term of an agreement in principle?

The agreement with principle mortgage lenders typically lasts 60 to 90 days. An online mortgage promise should be the same.

It is important to view the agreement as a “live system”. If your situation changes and you miss a payment on your credit cards after the initial agreement was signed, your credit score may change, and your provider might decline your application.

Similar to the above, if there is no change in your AIP, it’s unlikely that the same lender won’t re-approve. Resubmissions are quick and easy to complete and can often be completed in a few clicks.

Talk to an expert about your AIP

No matter your situation, we will connect you to one of our expert mortgage brokers who will find you your preferred lender.

Our experts are all whole-of-market brokers and have the knowledge, tools, and experience to help you understand your options.

They have helped many people get the perfect mortgage and are well-placed to assist you in finding the right mortgage for you.

Contact us now and we’ll connect you with an advisor as soon as possible by enquiring today.


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