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Monday Myth-Buster: Do I need a mortgage in principle?
You don’t need a mortgage in principle if you live in England, Wales or Northern Ireland, but it might be a good idea to think about getting one if you’re looking to buy a home.
If you live in Scotland, you will need to get a mortgage agreement in principle before you can make an offer on a property.
What is it?
A mortgage in principle – also known as an agreement in principle, decision in principle or mortgage promise – is a document given to you by a mortgage lender that lets you know how much they may be willing to lend to you.
They work this out by looking at things like your income, outgoings, credit history and your previous addresses.
You can apply for an agreement in principle from any mortgage lender. When you do, you’ll go through the same sort of questions that you would when you apply for a mortgage. The only difference here is that your agreement in principle is no guarantee that they will lend to you when you find a home you want to place an offer on.
The agreement in principle is best used as an indication of how much you’ll be able to borrow. Applying for one before you start hunting for properties is a good idea because it helps give you a rough figure of what your budget will be.
So should I get one?
Even though it’s not needed if you’re buying a home in England, Wales or Northern Ireland, it may prove useful to have one.
Having a mortgage in principle gives you a better idea of how much cash you’ll be able to borrow. It can also make you more appealing to sellers if they’ve had more than one offer on the property, as they can see you’re serious about buying and know a lender has – in theory – already given you a thumbs up.
But if you live in Scotland, the process is slightly different. You will need to have a mortgage in principle before you can place an offer on a property, and you may have to pay a small fee for this. You can find out more about buying a property in Scotland here.
As we said earlier, there’s no guarantees that your mortgage lender will be happy to go ahead with lending you the cash even if you have an agreement in principle. On the other hand, it won’t cost you anything to get one, and it might make you a more attractive buyer in the eyes of the seller.