On the surface, buying a property seems like a fairly straightforward process. However, you’ll quickly realize that there are a lot of options you need to consider and, if you haven’t done your research, you risk getting stuck with a bad mortgage deal for a less-than-subpar property.
Getting a mortgage in principle (MIP) is one of the ways that you can ensure the best possible outcome for becoming a homeowner. However, many people don’t even fully understand what a mortgage is, never mind one in principle! That’s why we’re here to help. Keep reading for everything you need to know about an MIP.
What is a Mortgage in Principle?
An MIP is also known as an agreement in principle (AIP), decision-in-principle (DIP) or a mortgage promise. This is the amount of money a bank is prepared to loan you when buying a house, and can guide you on your affordability before you start your house search. The best way to weigh up your options is by getting an MIP from a trusted broker like Trussle as this broker service can show you what’s on offer in your current circumstances and help you get a good deal.
The process works a lot like getting an actual mortgage. You’ll need to provide financial information, proof of your identity and your residential history (usually from the last three years). This helps your chosen broker to give you a rough outline of your affordability, which can be passed on to a mortgage lender. If a lender agrees to give you an MIP, it’s an unofficial agreement that they will lend you a certain amount. You can then show this to realtors while you’re house-hunting.
It’s important to note that an MIP is not a guarantee that the lender will provide you with a mortgage; it’s simply an indication that they do not consider you a financial risk, but they have no obligation to provide you with a loan.
Benefits of a Mortgage-In-Principle
There are so many advantages to an MIP that virtually every prospective homeowner should get one.
Reduces the Chance of Unpleasant Financial Surprises
As we said, an MIP lets you see (roughly) how much you’ll be allowed to borrow when you take out an actual mortgage. By having this figure, you can look at properties in your chosen area that fit your affordability. Therefore, you’ll have a realistic idea of the type of property you’ll be buying in the future, and you won’t be hit with the surprise of falling in love with a house, only to realize you can’t afford it.
Realtors Will Take You More Seriously
Like it or not, most realtors will laugh you out of the building if you try to make an offer without an MIP in place. It shows that you have a decent credit score, minimal to no debt in your name, and stable employment that will allow you to pay a mortgage. Being able to show that you have an MIP will greatly increase your chances of being able to put an offer on your dream property, putting you ahead of other prospective buyers.
It Can Speed Up the Process
This is especially true if you opt to borrow from the same lender who gives you the MIP. On average, it takes around fifty days just to close the deal on a property. With an MIP, you’ll have already gathered all the information you need for a mortgage, taking away a lot of the time required on your end.
Getting a mortgage in principle from a trusted broker is free, quick and easy, as well as taking much of the stress off your shoulders. Really, there’s no reason not to.