Agreement in Principle is a term used in the mortgage industry to describe the initial agreement between a lender and a potential borrower. As one of the most trusted voices in personal finance, Martin Lewis has weighed in on this topic and provided his valuable insight to help those looking to secure a mortgage.
Firstly, it’s important to understand what an Agreement in Principle (AIP) means. It’s essentially a confirmation from a lender or mortgage broker stating that, based on an initial assessment of a borrower`s financial situation, they would be open to lending them a certain amount of money. However, it’s important to note that an AIP is not a guarantee of a mortgage and it’s not legally binding.
So, why is an AIP important? Well, it shows estate agents and sellers that you are a serious and committed buyer. It also helps to give you an idea of how much you are likely to be able to borrow, which can help in your property search.
Martin Lewis recommends that borrowers obtain several AIPs from different lenders or mortgage brokers before making a final decision. This allows you to compare the rates and terms offered by different lenders and choose the one that best suits your needs. It’s also important to remember that an AIP is not a commitment to borrow from that lender, so don`t be afraid to shop around.
When applying for an AIP, be honest about your financial situation. This will help the lender to accurately assess your ability to repay the loan and offer you a reasonable rate. It’s also worth noting that an AIP will usually last for around three to six months, so make sure you complete your purchase within this time frame.
In summary, an Agreement in Principle is an important step in securing a mortgage. It can help you to gauge how much you are likely to be able to borrow, and show that you are a serious buyer. Martin Lewis recommends obtaining several AIPs from different lenders to compare rates and terms before making a final decision. Remember to be honest about your financial situation and complete your purchase within the given time frame.
