How Long Does a Mortgage in Principle Last?

How Long Does A Mortgage In Principal Last

The term “mortgage in principle” or “mortgage agreement in principle” is primarily used in the U.K. to refer to a lender’s agreement to provide you a mortgage when you are ready to buy. It is practically identical to the mortgage prequalification agreements that we use here in the U.S.

A Mortgage in Principle Lasts Three to Six Months

Most lenders will offer you this promissory agreement for a period of between three and six months. If it looks as though your home purchase will take longer, they can either extend the agreement or ask you to reapply. If they do ask for a reapplication, you will need to provide your current financial details to them again.

Image depicting a mortgage in principle lasting 3-6 months.

A mortgage in principle will last three to six months before being required to reapply.

Whether you call it a mortgage in principle or a mortgage prequalification, this is a worthwhile step to take if you’re considering buying a home. Simply knowing what you can afford ahead of time will reduce a lot of the potential frustration of finding your dream home and then not qualifying to buy it.

A Mortgage in Principle is a Prequalification Process

A mortgage in principle is simply a process in which a lender requires you to provide details about your employment, income, expenses, debt, and credit score, among other things. The lender evaluates this information to determine a price point that you will likely qualify for along with an agreement to provide the loan after you’ve found the perfect place to call home.

Image of the requirements for obtaining a mortgage in principle and the loan agreement you'll receive.

While similar, getting a mortgage prequalification is less arduous than getting an actual mortgage.

It is important to note that with the exception of a credit check, the lender does not thoroughly verify this information as they would through a lengthy mortgage application process. A mortgage in principle is based primarily on the information that you provide to them, and as such it is subject to verification before a mortgage is offered.

Obtaining a Mortgage in Principle Has Many Advantages

With mortgage interest rates still near all-time lows, many people are wondering if this is the right time to consider buying now that real estate prices are once again on the rise and mortgage lending has somewhat normalized.

If you’re thinking of dipping your toes back in the real estate market, you should seriously consider asking a lender for a mortgage in principle.

One advantage of getting a mortgage in principle from a lender is you can differentiate yourself from many other potential buyers who haven’t taken this step. It tells a seller or seller’s agent that you are qualified and serious about purchasing the home and know what you can afford.

Image of two men shaking hands.

One advantage is building a relationship with a lender who is ready to approve you.

Other advantages to having a mortgage in principle include:

  • Building a relationship with a lender who is ready to provide you with a mortgage. This can be a real advantage when negotiating the terms of purchase.
  • Because a lender runs a credit check on you, they are aware of your financial situation and any potential problems beforehand. This means you are closer to actually obtaining a mortgage than someone who does not have this agreement.
  • A mortgage in principle involves the lender advising you on just how much they are willing to lend based on your finances. This allows you to confidently make an offer and for the seller to feel more secure in accepting it.

The home-buying process is complicated enough. Taking this extra initiative may seem like it adds just one more step, but it will be worth it in the long run.

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