Loan-to-Value
The mortgage amount shown as a percentage of the property value.
Read term →What is Agreement in Principle?
An Agreement in Principle is an early indication of how much a lender may be willing to lend before you make a full mortgage application.
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Definition
An Agreement in Principle is an early indication from a mortgage lender of how much you may be able to borrow, based on the information you provide. It is not a guaranteed mortgage offer.
Agreement in Principle in plain English
An Agreement in Principle is a lender saying, “Based on what you have told us so far, we may be prepared to lend you up to this amount.”
It can help you understand your likely budget before you start viewing properties or making offers. Estate agents may also ask whether you have one because it shows you have started checking your mortgage position.
You may also see it called a Decision in Principle, Mortgage in Principle, AIP, DIP or MIP. These terms are often used in similar ways.
How an Agreement in Principle works
To get an AIP, you usually provide basic details about your income, deposit, outgoings, debts and personal circumstances. The lender or broker uses this information to estimate what you may be able to borrow.
| Information usually needed | Why it matters |
|---|---|
| Income | Helps estimate borrowing capacity and affordability. |
| Deposit | Affects loan-to-value and the mortgage products available. |
| Credit commitments | Loans, credit cards and car finance can reduce affordability. |
| Regular spending | Helps the lender judge whether repayments are affordable. |
| Credit check | Some lenders use a soft search, while others may use a hard search. |
Important: ask whether the lender uses a soft or hard credit search before applying, especially if you plan to apply with more than one lender.
Agreement in Principle example
Suppose you earn £45,000 a year, have a £35,000 deposit and limited monthly debts. A lender may issue an AIP suggesting you could borrow up to a certain amount, subject to full checks.
Income
Used to estimate borrowing
Deposit
Helps shape the property budget
AIP result
Indicative, not guaranteed
The final mortgage offer may be different after the lender checks documents, credit history, property value and full affordability.
Estimate your likely mortgage budget
Use the Mortgage Affordability Calculator before applying for an Agreement in Principle.
Agreement in Principle vs mortgage offer
An AIP is not the same as a mortgage offer. It comes earlier in the process and is based on limited information.
| Stage | Meaning | How reliable is it? |
|---|---|---|
| Agreement in Principle | Early indication of how much you may be able to borrow. | Useful, but not guaranteed. |
| Full mortgage application | The lender checks documents, income, credit, deposit and property details. | More detailed underwriting stage. |
| Mortgage offer | The lender formally offers the mortgage after checks are complete. | Much stronger than an AIP, subject to the offer conditions. |
Key point: an AIP can help with house hunting, but only a formal mortgage offer confirms the lender is prepared to lend on the property.
Why an Agreement in Principle matters
An Agreement in Principle matters because it can help you avoid looking at properties far outside your likely budget.
- It helps set a budget: you get an early idea of possible borrowing.
- It can support offers: estate agents may view you as more prepared.
- It highlights issues early: credit or affordability problems may appear before a full application.
- It saves time: you can focus on homes closer to your likely price range.
- It is still conditional: the lender can still say no after full checks.
Does an Agreement in Principle affect your credit score?
It depends on the lender and the type of credit search used. Some lenders use a soft search, which is usually not visible to other lenders. Others may use a hard search, which can appear on your credit file.
Before applying, check whether the AIP uses a soft or hard credit check. This matters more if you are comparing several lenders in a short time.
How long does an Agreement in Principle last?
The validity period depends on the lender. Many AIPs are valid for a limited period, often long enough to help with early property searching, but they may expire before you find a home.
If your income, debts, deposit or credit position changes, the AIP may no longer reflect what you can borrow.
Common Agreement in Principle mistakes
- Thinking an AIP is the same as a full mortgage offer.
- Using an AIP amount as a guaranteed budget.
- Forgetting that debts and commitments can reduce affordability.
- Ignoring the deposit and stamp duty or property tax costs.
- Applying with several lenders without checking soft vs hard searches.
- Assuming the property will pass the lender’s valuation automatically.
Practical step: use an AIP as a guide, then budget with a safety margin before making an offer.