A mortgage in principle, also known as a Decision in Principle (DIP), Agreement in Principle (AIP), or mortgage promise, is an official estimate from a lender of how much you can afford to borrow on a mortgage. It is a written indication from a bank or building society stating how much it might be prepared to lend you. It is not binding, and the lender could still refuse you a mortgage on those terms, but it is a useful indicator of what you can probably borrow, and estate agents take them seriously.

A mortgage in principle gives you a clear idea of what you can afford, so you know your potential buying power and also your limits. Sometimes you can afford a better home than you think, while sometimes your ambitions will need scaling back a bit. Some estate agents and/or sellers will only take your offer seriously if you have a mortgage in principle. This is especially the case if you’re buying in Scotland. Sometimes you won’t even get a viewing unless you have a mortgage in principle.

It is important to note that a mortgage in principle is offered in principle, and when you make a formal application for the mortgage itself, the lender has the right to change the details of the deal, or they may decide not to grant you the loan (for example, if your financial circumstances have changed). If you leave a long period of time between getting a mortgage in principle and applying for a mortgage, you may find that the interest rates have changed, or that you could find a better deal elsewhere.

To get a mortgage in principle, you need to provide some basic information about your income, spending, and debts. You don’t need to bank with the lender, and you can apply for a mortgage in principle online. It is important to check with a lender whether they’ve run a soft or hard search before applying for a mortgage in principle. A mortgage in principle doesn’t affect your credit score, and unlike making a mortgage application, lenders dont run a full credit check on you for an Agreement in Principle.