How Long Does a Mortgage in Principle Last?

A Mortgage in Principle (MIP), also known as an Agreement in Principle (AIP) or Decision in Principle (DIP), serves as an initial assessment by a lender regarding the amount they might be willing to lend a prospective borrower. It provides a preliminary indication of borrowing capacity based on a brief review of the applicant’s financial standing. This document is a helpful step in the home-buying journey, offering a realistic budget for property searches. An MIP is not a binding loan offer, nor does it guarantee final mortgage approval.

Duration of a Mortgage in Principle

A Mortgage in Principle typically remains valid for 30 to 90 days, though this timeframe can vary by lender. The document reflects a snapshot of the applicant’s financial health at the time of its issuance. Borrowers should confirm the exact expiration date with their specific lender to ensure clarity for property searching and subsequent full application.

Factors Influencing Validity

Several factors can cause a Mortgage in Principle to become invalid or necessitate re-evaluation even before its stated expiration date. Significant changes in an applicant’s financial situation are common reasons. For instance, a job loss, a reduction in income, or a shift from employed to self-employed status can impact the lender’s initial assessment.

An increase in monthly outgoings, such as taking on new loans or accumulating additional credit card debt, can also affect the MIP’s validity. A notable change in one’s credit score, whether due to missed payments or new credit inquiries, may prompt a re-evaluation by the lender. Lenders also periodically update their lending criteria or interest rates, which could influence previously issued MIPs.

Next Steps After Obtaining a Mortgage in Principle

Once a Mortgage in Principle is secured and remains valid, borrowers can confidently proceed with their property search. The MIP provides a clear estimate of the maximum amount a lender might provide, helping to narrow down suitable properties within a defined budget. This demonstrates to real estate agents and sellers that the buyer is serious and has preliminary financial backing.

As a property is identified and an offer is accepted, the next step involves preparing for a full mortgage application. This requires gathering comprehensive documentation, including:
Recent pay stubs
W-2 forms from the past two years
Bank statements for checking and savings accounts
Tax returns
Proof of identity
Details on existing debts

Submitting verified financial information allows the lender to conduct a more in-depth assessment before making a final loan offer.

Renewing or Reapplying for a Mortgage in Principle

If a Mortgage in Principle is nearing its expiration date, or if significant financial changes have occurred, borrowers will need to consider renewing or reapplying. Contact the original lender to inquire about their specific renewal process. Some lenders may offer a straightforward extension if the borrower’s financial circumstances have not materially changed.

The renewal or reapplication process usually requires providing updated financial information. This involves submitting current income details, recent bank statements, and any changes to outgoings, allowing the lender to conduct a new assessment. An updated credit check may also be performed to review the current credit score and history. Based on this updated information and current lending criteria, the lender will re-evaluate the borrowing capacity, which may result in a different lending amount or revised terms.