A mortgage in principle is an initial mortgage offer made by a lender to a borrower. The offer is conditional upon checks and other criteria (including an acceptable mortgage valuation) but it has several benefits for the borrower.
Why should I get a Mortgage in Principle?
If you possess a mortgage in principle you have a big advantage over another buyer that does not - all things being equal. Why? Because if you have a mortgage offer in principle you are effectively saying to any seller (and their agent) “I have the money!” And that is a big factor when a seller is choosing between offers. After all, before contract anyone can say anything. It may not be moral, but it’s unlikely to be legally binding or even unlawful to lie about your financial circumstances.
If you are able to prove that you hold a formal mortgage offer in principle then you are in a strong position to perform quickly.
How do I get a Mortgage in Principle?
The starting point is to decide who you are going to for your mortgage. This is where an experienced and qualified Mortgage Advisor will become invaluable. There are hundreds of different mortgage products and lenders out there at any one time. Some are better than others and many will be entirely unsuitable for your own personal circumstances. Choosing the wrong lender or mortgage product can cost you thousands!
Once you have decided on who is best for your lender, you need to apply for a mortgage. In order for a lender to issue you with a formal mortgage offer in principle, they’ll need a lot of information. At this stage they won’t necessarily need proof of things like income and monthly expenses but they will need this proof before you receive the money and if you can’t provide it later you will lose your mortgage offer. Therefore, liaise with your advisor sooner rather than later and make sure you provide accurate and up-to-date information.
If you are self-employed you’re going to need to prove your personal income and this is going to mean consulting with the taxman and/or your accountant. Do this before you start the process. It will delay things if you don't.
When should I apply for a Mortgage in Principle?
Mortgage offers in principle usually have a time frame and they usually expire after, say 3 or 6 months. It’s therefore important that you apply at the right time.
This can be tricky as when is ‘the right time’? If you are confident that you will find your dream home within a couple of months then it’s probably best to apply as soon as you start looking. This has two major benefits, namely;
- If you find your dream home in the first two weeks you will be well on your way to getting your mortgage offer and
- applying early will confirm how much money you can borrow and on what terms, making affordability clear and also setting a top level on your buying power. Why waste time looking at property that is miles above what you can realistically afford?
Who should advise me on the mortgage application process?
If you require a mortgage who better to speak with than Mortgage Required? We’re hugely experienced in this sector and our advisors have access to the whole mortgage market meaning that we can quickly discount unsuitable or unnecessarily expensive loans before making our recommendation. Then, we’ll help guide you through the application process, deal with all the paperwork and liaise with your solicitor and other advisors right up to completion.
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