What is a Mortgage in Principle and How Long Do They Last?
If you are looking to purchase a new home, you might be wondering how much money you can borrow. While you might have an idea of what kind of property you want, you cannot make a final decision without having the funds available and you need to know how much money lenders are willing to give you. Sure, you might have a certain property you like that you have seen with Chelmsford estate agents but it might be out of your budget this is where a mortgage in principle can help.
What is a mortgage in principle?
Once you begin the process of purchasing a new home, you have to find out how much you can borrow. To do this, you will need to submit an application to lenders who will then look at your financial situation such as your income as well as any debt, outgoings, and where you have lived for the last three years.
After you have provided all of this information, you are taking the first step toward buying a new home. It is obligation-free while lenders will need to carry out a soft credit check which means that it won’t have a negative impact on your credit score. You will then be given an amount of how much you can borrow from your lender, giving you an idea of what kind of property you can buy, this is known as a mortgage in principle.
Why apply for a mortgage in principle?
Most people have to take out a mortgage in order to purchase a property, but it is important to understand how much you can borrow. Some estate agents will not allow you to put in an offer on a property without a mortgage in principle in place. Furthermore, when you have a mortgage in principle, it could help you to negotiate a better price with the seller because it makes them aware that you are serious about purchasing a property.
The process is quick and you can usually get a figure in a matter of minutes after you have been asked questions and a soft credit check has been carried out.
How long is it valid?
In most cases, a mortgage in principle will last for anything from 30 to 90 days and if you do not progress with your application, the agreement ends. If you choose to purchase a property again, you will need to go through the same process although you can renew the terms of your agreement with some lender although the figure you can borrow might change.
Is it the same as a mortgage offer?
You might think that a mortgage in principle is a finalized figure, but this is not the case. Should you choose to take out a mortgage with a lender, they will carry out a full credit check. Once this has been done, they will then offer you a finalized mortgage offer that will enable you to go ahead and make your purchase.