If you've been thinking about purchasing some kind of property in the UK, there's a pretty good chance that you've seen the term “mortgage in principle” or even just “agreement in principle” thrown around and perhaps been left a bit confused.
We'll come onto what this actually is and what kind of role it plays in the whole mortgage application process, but we'll also talk a bit about how long these preliminary agreements last — not to spoil the article, but a mortgage agreement in principle doesn't last forever, so it is definitely worth understanding this before we move forward.
Understanding the Mortgage in Principle
So, before we dive straight in and talk about how long they last, let's clarify what a mortgage in principle actually is because they're usually a bit confusing to get your head around.
In reality, a mortgage in principle is actually pretty easy to understand — they're a kind of preliminary agreement that you'll be given from your mortgage lender that shows how much they might be willing to lend you for your mortgage (once they've taken a look at your specific financial circumstances).
Essentially, though, the main thing to keep in mind here is that a mortgage in principle isn't actually a guaranteed mortgage offer. It's just something known as a soft credit check that gives you a general idea of how much you might be able to borrow.
The Importance of a Mortgage in Principle
Generally speaking, getting your hands on a mortgage in principle is one of the most important steps you can take before house hunting, as it's one of the only ways you can demonstrate to estate agents that you're a serious buyer and won't have any issues with securing the financing.
Naturally, this can give you a pretty nice advantage in a competitive property market because when so many people are trying to apply for mortgages without good credit scores, you need to do all you can to stand out.
The Mortgage Application Process
There are a couple of steps involved when you're properly applying for a mortgage, so let's take a look at the role a mortgage in principle plays.
Initial Inquiry and Soft Credit Check
Naturally, things start by first getting in touch with either a mortgage lender or mortgage broker who'll perform a soft credit check (this doesn't leave a mark on your credit file). Fortunately, this just lets them assess your credit history without affecting your overall credit rating.
Providing Financial Information
You typically need to provide a few general details about your income, employment, and any other existing credit agreements you might have, too. The lender will also review your bank statements here before they assess your creditworthiness.
How Long Does a Mortgage in Principle Last?
To shed some light on the main topic of the article, let's get into the duration of a mortgage in principle.
Typical Duration
Generally speaking, you'll find that a mortgage in principle only really lasts around 60 and 90 days, so while this is a decent timeframe for you to find the right place to live, it's obviously not an excessive amount of time.
In addition, it's definitely worth noting that this isn't your deadline for actually finding a property; it's just the period of time when the mortgage lender's initial assessment is still valid for you to use.
Why the Timeframe Matters
It goes without saying that the property market is pretty dynamic, so conditions can naturally change quite rapidly.
Put simply, a mortgage in principle only ever shows what the lender thinks about your financial circumstance at the specific point in time that you have your soft credit check — they don't last forever.
Once this validity period finally expires, there's a good chance that the lender might have to reassess your situation (provided you've not already secured the mortgage), as any kind of change in your financial circumstances can obviously have an impact on the amount that they are willing to lend you.
Factors Influencing the Duration
Let's wrap things up by taking a look at what kinds of things might change how long a mortgage in principle is valid for:
Changes in Financial Circumstances
Any significant changes in your financial circumstances during the validity period we mentioned earlier — a change in your employment or other additional credit agreements, for example — are likely to have an impact on the amount your mortgage lender is willing to offer.
Property Market Conditions
As we mentioned earlier, this can be a fairly competitive market with properties being sold very quickly — essentially meaning that any kind of delay in your search for a new home might result in a reassessment of your mortgage in principle.
What Happens If the Mortgage in Principle Expires?
Unfortunately, there's a pretty strong chance that you'll have to go through the entire process again if your mortgage in principle expires before you find somewhere to live — meaning you have to revisit all the same soft credit checks and get your new mortgage in principle.
Just try to keep in mind that applying for multiple credit checks in short periods like this can sometimes affect your credit rating, so definitely try to avoid making a habit of letting your agreement expire if possible.
