When you`re in the process of buying a home or looking to remortgage, you may have heard the term “agreement in principle” mentioned. An agreement in principle, also known as a mortgage in principle or decision in principle, is a preliminary assessment from a lender that gives you an idea of how much they are willing to lend you based on your financial situation.
So, do you need an agreement in principle? The answer is that it can be helpful, but it`s not always necessary.
One of the main advantages of getting an agreement in principle is that it can give you a better idea of what you can afford when it comes to looking for a property. It can also help give you an edge over other potential buyers, as it shows that you are serious about your interest in a property and that you are financially viable.
An agreement in principle can also be useful for those looking to remortgage, as it can give you an indication of how much you could borrow and what kind of rates you might be eligible for.
However, it`s important to note that an agreement in principle is not a guarantee of a loan. It`s simply an assessment based on some basic financial information. The lender will still need to carry out a full assessment before they offer you a mortgage, which will include a credit check, proof of income and a detailed look at your financial history.
In some cases, having an agreement in principle can also be a disadvantage. This is because it can limit your options when it comes to choosing a lender, as you may feel obligated to stick with the lender who provided the agreement in principle. This can lead to you missing out on better deals or more suitable lenders.
Ultimately, whether or not you need an agreement in principle will depend on your individual circumstances. If you`re in a strong financial position and have a good credit history, then you may not feel the need for an agreement in principle. However, if you`re unsure of how much you could borrow or want to show sellers that you are a serious buyer, then it may be worth considering.