Purchasing a property can be a bit of a minefield, especially if you’re a first-time buyer. From the initial search and bidding wars to solicitor’s searches and surveys, it’s a long and complicated road to getting the keys in your hand.

One of the main reasons that the process can be overwhelming is the complex financing options available such as mortgages and government affordable home ownership schemes. Getting an Agreement in Principle is a great introduction to home financing for first-time buyers – and it’s completely free.

What is an Agreement in Principle?

Also known as a Decision in Principle or a Mortgage in Principle, an Agreement in Principle is an initial estimate of how much a bank could lend you for your mortgage.

This is calculated based on your income and monthly expenses and the size of the cash deposit you could put towards a property.

Your mortgage is the money loaned by a bank or other provider to assist you in purchasing a home. A monthly repayment plan will be agreed based on how much you borrow and at what interest rate.

How can I get an Agreement in Principle?

The easiest way to get an Agreement in Principle is via the website of your chosen mortgage lender or by contacting a mortgage advisor. Simply visit their website and input the key information to receive an almost instantaneous decision. You could also get a Decision in Principle over the phone.

Remember that you’re not limited to your current bank provider: especially if you’re a first-time buyer, it’s a good idea to shop around for mortgages with the best rates and repayment schedules.

When should I get one?

You can get an Agreement in Principle at any time if you’re a UK resident aged 18 or over. It’s advisable to get one before you begin the process of buying a house because it helps you to understand which properties you can realistically afford.

In addition, an Agreement in Principle usually only lasts for 90 days, so it’s only a short-term indication of how much you could borrow from that bank or mortgage lender.

Good to know

  1. It’s not a guarantee

While the amount shown on your Agreement in Principle is a useful indication of how much you could borrow, it’s not a guarantee. This is an estimate that may change when you come to apply for a mortgage. Neither you nor the lender has any obligation with an AIP.

  1. The interest rate could fluctuate

Remember that the interest rate could fluctuate significantly between you getting an AIP and obtaining a mortgage. Last year, the Bank of England attempted to control rapidly rising inflation with an aggressive hike in interest rates which are set to fall again throughout 2024.

  1. Your credit score is unaffected

An AIP does not involve a full credit check and therefore your credit score is unaffected by this process.