What is an AIP and Why It’s Important on Your Mortgage Journey?
You’re about to make an offer on your dream home – whether it’s your first home or a new one – but do you have an AIP or a DIP in place?
A house purchase is one of the biggest undertakings you can make in your life. And getting a mortgage is a complex journey to go on – there are lots things to sort out and some of them you might never have heard of. So today, we’re breaking down one of those things – an Agreement or Decision in Principle.
What is an AIP?
So what is an AIP? Well, that’s easy – it’s an Agreement in Principle! Next question!
Actually, there’s more to an AIP than just what the letters stand for. An AIP gives you an idea of what you can borrow, so that you have a ballpark figure on what you can afford.
I really want to emphasise this though – this is a BALLPARK figure. When you actually apply for a mortgage, your broker will do a deep and thorough dive into your finances, from your earnings and savings to your debts and stress tests. So the final amount, with a complete understanding of your finances could be a little over or under what was suggested on your AIP.
An AIP is not a guarantee of a mortgage – as it says in the name, it’s just ‘in principle’.
Don’t have a broker who can provide you with an AIP? Book a call with us today – we can help you out with that!
Difference between AIP and DIP?
At the top of this video, I also mentioned a DIP… So what’s that? Well, it’s exactly the same as an Agreement in Principle, it just goes by another name.
You might also hear this referred to as an ‘Initial Credit Check’ or ‘Mortgage in Principle’. So, if you hear any of those terms – they’re all just different names for the same thing.
An AIP is an Agreement in Principle, and a DIP is a Decision in Principle. Both are the same thing and may also be known as an ‘initial credit check’ or a ‘Mortgage in Principle’. Basically, it confirms you can borrow a certain amount in relation to your income and outgoings.
When do you need an AIP?
Many estate agents will ask for you to have an AIP before you can view a property. They do this to ensure that you are serious about purchasing and aren’t just browsing with no intention of putting in an offer.
However, it’s also handy to have before you start your hunt as it gives you an idea of how much you can afford, so you can look accordingly. You can get an idea of what you can borrow from an online mortgage calculator, but an AIP will be more accurate AND grants you access to property viewings should the estate agent require it.
How do you get an AIP?
There are a couple of ways you can get an AIP.
- Direct from a lender. You could call a bank or building society’s Mortgage Team directly and request an AIP. Some even offer the service online, which takes about 10mins.
- From a broker. Alternatively, you can get an AIP from a broker.
We recommend going to a broker for a few reasons – you really should use a broker to get your mortgage, as they can search the market and get the best deal for you. You are unlikely to go direct to a lender for your mortgage as you are massively limiting yourself that way and you have no idea if they are really the best on the market.
In which case, work with a broker from the start of your journey. Particularly if you are a first time buyer, or if this is your first time selling a property to buy a new one, a broker not only sorts out your mortgage, they can really help you with any questions or concerns you may have. They know the market inside and out – so get them on your team EARLY.
Don’t have a broker yet? Book a call and we’ll help you out with that.
Then what?
So you have your AIP and you’ve found the property for you – the next step is to make an offer.
Give the estate agent a call and let them know how much you’d like to offer. The estate agent will go back to discuss with the homeowner and let you know. We recommend that even if you have this conversation over the phone, you follow up with an email to confirm in writing that you want to offer and how much.
Your broker then steps in to work with you to get the actual mortgage – not one in principle anymore! – in place. If you want to know more about the step-by-step journey to buying a property in the UK, we’ve got a video on that.
So there you go – that’s what an AIP is and why you need one. Do you have any questions about the mortgage journey that you’d like us to answer? Let us know in the comments below.
