Significance of Mortgage Agreement in Principle

When it comes to mortgage, we always try to seek some security and guarantee on the part of the availability of funds. Agreement in principle is a workable tool to attain that guarantee with significance.

Many points explain the significance of agreement in principle for a mortgage borrower. Why not get into a profound journey and get a bit closer to the concept of AIP.

What is an agreement in principle?

An agreement in principle is a statement or certificate from the lender that describes that it will lend you a certain amount for a mortgage.

A fact is necessary to mention here is that an AIP is not a confirmation from the mortgage company. It is offered based on an initial check of your financial conditions. To finally borrow money, you have to go through the complete detailed procedure and affordability check. Never misinterpret an AIP with mortgage approval. Both are entirely different.

Procedure to obtain an agreement in principle

It is not very difficult to obtain and AIP, but several formalities are required to get the certificate.

Provide the following documents to a lender your mortgage broker can also do that on your behalf.

  • Your name
  • Birth details
  • Address history of three years
  • Income and expenditure

These are the necessary details that the mortgage lenders ask for because they want to get an initial idea of your financial conditions. It takes only three to four days to obtain an agreement in principle. If your finances are strong, maybe you can get it faster and sooner.

Reasons for which the lender can deny agreement in principle

When the finances of an applicant show the risk signs for the future repaying capacity, a lender may deny the AIP. Usually, the following reasons become the reasons for the rejection of an AIP.

  • Poor credit history with CCJ
  • Absence from the electoral register
  • Poor debt management
  • Unfit to the demographic parameters of the lender

Getting a rejection on an AIP does not mean that you have no chance of mortgage approval. Look around, and the market is full of options. Contact to any other lender or hire an online mortgage broker to do this job. They can find a mortgage company that can offer you an AIP in current financial conditions. However, at the same time, the importance of flawless finances cannot be denied.

Does Agreement in principle affect my credit score?

The effect in credit score occurs due to the search footprint. The lender needs to perform a credit check to know the accuracy of the financial details you have provided. For the purpose, some lenders perform a soft credit check, which fulfills both the goals. They get to know about the finances of the applicant, and the borrower can avoid the search footprint.

Some lenders can perform a hard credit check, but for an AIP, the mortgage company needs to take your permission for that. In short, you can say that your credit score performance is safe and to make it safer by asking the lender to perform the only soft check.

What are the benefits of an Agreement in principle?

The first thing that an agreement in principle provides you is the closeness to the certainty of fund availability. Besides this, there are many more reasons that can convince on the significance of the AIP certificate.

  • You can buy a property with an amount in mind. It gives clarity on your maximum affordability towards the big purchase. You do not need to struggle during the price negotiation with the seller because your mortgage limits are more or less clear already.
  • You can get the idea of the deposit money that is needed to save. When there is a hint about the mortgage amount, obviously it is easier to arrange the down payment. It usually is advisable to save a more considerable amount than what is required because an AIP is not a confirmed mortgage approval.
  • The number of property viewings reduces because there is already a financial limit, which a home buyer needs to follow. Why visit the properties that are out of the budget? The better thing is to find the best possible in the available affordability boundaries.

An AIP always helps attain a clearer picture of the complete situation. People accept its significance because it improves their confidence in property buying. Accordingly, they can plan how will they manage the other expenses and monthly budget when once the mortgage repayments start.


An agreement in principle is significant in many ways. Its presence in the industry is useful for the borrowers as well as the lender. The borrower can get the idea of his financial limits, and the lender can calculate the risk level on an applicant. It helps the buyers cover the initial few miles of the long journey of property purchase.

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