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Insight: Does A Mortgage In Principle Mean You’re Guaranteed A Mortgage?

8 months ago
Insight: Does A Mortgage In Principle Mean You’re Guaranteed A Mortgage?

Purchasing a property in Cardiff is something you do in stages, and an early step towards owning your property is obtaining your MIP or mortgage in principle (sometimes called a DIP – Decision In Principle or an AIP – Agreement In Principle).

Once you have a mortgage in principle, you can progress onto the next step of buying your property. A MIP shows both sellers and their estate agents that you’re serious and also in a suitable position to move on with the purchase.

It’s important to be aware, though, that obtaining a mortgage in principle doesn’t mean you’re guaranteed a mortgage.

• Are mortgages in principle reliable?
• Can anything go wrong after securing a mortgage agreement with your lender?
• Should you even bother getting a MIP in the first place?

The team here at Fortis are on hand to answer all your questions!

What Are Mortgages In Principle?
A mortgage in principle is an agreement from your mortgage provider that states they’re willing to allow you to borrow a certain sum from them to purchase a property. Their decision about whether they’ll issue you with a MIP is based on all the information and documentation you give them, but it’s vital to note that mortgages must still be underwritten before the lender can make you their formal offer.

Your lender may withdraw the mortgage in principle for a variety of reasons. Therefore, rather than being a mortgage guarantee, they should be viewed more as a guide to affordability. Since the checks lenders carry out at this stage are quite basic, it’s possible certain details could emerge when they scrutinise your application more thoroughly.

Therefore, obtaining your mortgage in principle represents an essential step, however, it doesn’t give any assurance that your lender will offer you a mortgage of identical value once your formal application is submitted.

What Problems Can There Be With A Mortgage In Principle?
Lenders only carry out rudimentary checks before agreeing to your mortgage in principle. However, when they process your formal application, they’ll be more cautious. Your MIP could be withdrawn for reasons including:

• A low credit score
• A mistake that was made when applying for your MIP
• Failing the right to reside check
• A mistake in the formal mortgage application
• A change of employment
• An increase in the sum you have to borrow
• A significant financial change since making your application
• A previous undeclared CCJ
• An inability to provide satisfactory self-employment records

The property you want to buy will also be taken into account as some property types are not mortgageable. For example, if you want to buy a home that’s deemed to be uninhabitable or derelict at present, or if the property is at risk of flooding or has structural issues, you may struggle to get a mortgage through conventional means.

Do I Need A Mortgage In Principle?
Yes, it’s wise to have a mortgage in principle in place. Here’s why:

• When you get a mortgage in principle you’ll have a guideline figure to use as your affordability base as you search for a property.
• Although a MIP is only a guideline it still requires you to pass certain background checks, so your chance of being rejected at a later stage is reduced.
• It shows sellers and estate agents that you’re serious and able to afford to buy the property.
• It’s quicker to apply for a MIP than to submit a full formal application for a mortgage, so you can make an offer on your chosen property more quickly.
• It makes it quicker to make a formal mortgage application when you’re ready.

If you’ve already arranged your mortgage in principle certificate and are ready to buy a home in Cardiff, get in touch with our team at Fortis. Give us a call on 02920561111 or drop an email to hello@fortis.homes and we can help you find your perfect new home in Cardiff.

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