Mortgage in Principle Scotland
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Mortgage in Principle Scotland
Graeme Hilley & Ross Bremner explain how a Mortgage in Principle works.
What is a Mortgage in Principle?
A Mortgage in Principle, also called an Agreement in Principle, is essentially a pre-check to make sure you can get a mortgage. We would always advise getting an Agreement in Principle as early as you can in the process to understand what position you’re in.
When you’re considering a mortgage or looking at moving, there are three important questions: How much can I borrow? How much deposit do I need? How much will my monthly payment be per month?
An Agreement in Principle will answer those three questions and give us an indication of what lender you’re going to fit with. It will also give us an idea of how your credit sits, which will drive how much deposit you need.
We’ll look across the market and find out your maximum lending – because every lender will lend a different amount based on the same set of figures. So the Agreement in Principle is a really fast and efficient way for us as a broker to answer all those questions for you in one succinct appointment.
An Agreement in Principle is nothing to be worried about. It’s usually a soft check and it won’t impact your credit file. So it’s advisable to get one as soon as you’re thinking about buying a home.
How long does it take to get a Mortgage in Principle in Scotland?
It can happen very quickly. We speak to a client and once we get an understanding of their financial position, we can get a Mortgage in Principle almost instantaneously.
We decide on the best lender to proceed with for the Mortgage in Principle at that particular time then, subject to obtaining some very brief information to confirm who you are, where you live and what you earn, we can get a Mortgage in Principle within 15 minutes.
We’re securely linked up with all the major lenders with online access to generate that Mortgage in Principle confirmation straight away.
Do you need a deposit for a Mortgage in Principle?
No, not really. You could be looking to move in the next six months and still be saving for your deposit. We can still get you that Agreement in Principle so you can understand ultimately what deposit you will need.
So for anybody listening, don’t let the fact that you’ve not quite got the deposit there put you off. Even if you haven’t started saving yet, we can still get an Agreement in Principle ready for when you do have your deposit.
What should I do if my estate agent is asking to see my Mortgage in Principle? How do I get one?
As a mortgage broker, we have that Decision in Principle documentation available and can make contact with the estate agent and provide that information. We would also provide that to our clients and if they want to provide that to the estate agent, they can.
Typically, it’s required at the time of having an offer agreed on a property. That’s when a good estate agent would do the due diligence and make sure that you’ve got the funding in place via a Mortgage in Principle.
There’s no downside to providing that to an estate agent, because it gives them the confidence that you can see the transaction through. It’s something that we would actively encourage as you’re starting that buying process. You absolutely want to be mortgage and property ready by having a Mortgage in Principle sitting there.
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Do I have to have a Mortgage in Principle via the estate agent I am looking to purchase through?
No. You can select any broker or lender to get your Agreement in Principle. You’re never tied to an estate agent’s mortgage broker to obtain the Decision in Principle. You get freedom of choice there.
How reliable is a Mortgage in Principle?
A Mortgage in Principle typically relates to the information we’ve provided to the lender, whether it be address history, income or credit commitments. A credit search is also done at that point in time. It’s reliable, as long as the information provided to the lender then corresponds with the information provided at full application.
For example, if you say for the Decision in Principle that you earn £50,000 and you can demonstrate that with a pay slip, there’s no reason there’d be any issues from Mortgage in Principle to full application. So as long as the input is correct, Mortgages in Principle are very reliable.
How long does a Mortgage in Principle last?
It depends on the lender, but it could be anywhere between 30 days and 90 days. We would highlight that to the client at the time. If that Mortgage in Principle needs to be updated, we can simply refresh it to meet the validity period required. We can make sure you have more than enough time for a client to find the right property.
Can you get rejected for a Mortgage in Principle?
Yes, sometimes people aren’t in a position to get a mortgage. But importantly, just because one lender has said no, it doesn’t mean that the rest of the market will do the same.
If we do an Agreement in Principle with one lender and it’s not accepted for any reason, we will look to place it somewhere else. There are a huge number of lenders out there and more often than not, there is a lender for every situation and every client.
If you have been rejected previously, don’t let that be a barrier to reaching out. We’d be delighted to chat to you and see how we could potentially assist. We work to understand your circumstances and we’ll usually be able to find the right lender for you.
Can I make an offer with a Mortgage in Principle? Does a Mortgage in Principle mean you’ll get a mortgage?
Yes, you can make an offer. Typically, that’s what stage you would be at. Before having an offer agreed on a property, you would need a Mortgage in Principle. As we touched on earlier, they are reliable, assuming that the input is correct.
In terms of whether it means you’ll get a mortgage, it’s never 100% guaranteed. It’s still subject to underwriter review, which includes assessment of bank statements, pay slips, property valuation and a survey.
But it is very rare for someone to obtain a Mortgage in Principle and then the application gets approved further down the line. I’m pretty confident that you would get a mortgage if you’ve got a robust Mortgage in Principle in place.
Will I need a credit check? Does a Mortgage in Principle affect credit score?
Yes, a Mortgage in Principle will typically involve a credit check to establish from a credit perspective how you will sit with that individual lender’s overall scorecard. The good news is that the majority of lenders offer a Decision in Principle based on a soft check, which doesn’t impact your score, regardless of outcome.
Whether the result is good, bad or indifferent, it will not affect your credit score. Certain lenders do a full credit search at a Decision in Principle stage. But the majority use a soft check and we tend to choose these to give clients certainty that the mortgage is going to be okay without really impacting their credit score.
How do I apply for a Mortgage in Principle? How long does it take?
You would typically speak to a good mortgage broker like Envoy Financial and provide information about who you are, where you stay, what you earn, address history, deposit and credit commitments.
Once you’ve provided all that information, we give you an indication of the best lender for you at that particular time and then do a Decision in Principle with that lender. It doesn’t necessarily mean that you will proceed with that lender when you actually find a property. There’s still an opportunity to switch to a new lender when you buy.
It can happen very quickly. If you have the information available, we could have a Decision in Principle done within 15 minutes. That would get you mortgage ready, so you can go out and view properties with confidence that the funding is there if you see a property you like.
How can a mortgage broker help? Is there anything else we need to know?
There are a huge number of lenders out there, and they all do different things. As we’ve touched on in previous podcasts, some lenders offer 0% mortgages while others will accept 5% or 10% deposits.
It’s not your job to understand which is the right lender to go to, what everything means and how much you can borrow. That’s a mortgage broker’s job. We carry out the Decision in Principle and so you can understand your options as a First Time Buyer, mover or remortgager.
We explain what deposit you will need and ultimately how much you can borrow. We understand the criteria and how it affects you – ultimately, that will drive your decision on where you buy.
The key thing for anybody listening is don’t be nervous. Don’t think you need to know a lot. Pick up the phone, speak to us and we’ll be delighted to advise and talk you through how it all impacts you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.