Agreement in principle 101
An agreement in principle doesn’t affect your credit score. Lenders produce it using a soft credit search, which leaves no visible mark on your credit file, rather than the hard search used later for a full mortgage application.
An agreement in principle (AIP), also called a mortgage in principle (MIP) or decision in principle (DIP), is a document from a lender confirming they’d be willing to lend you a certain amount, based on the information you’ve given them. It’s not a guarantee of a mortgage, but it’s the closest thing to a yes you can get before making an offer on a property.
Key takeaways
| An agreement in principle uses a soft credit search, so it shouldn't affect your credit score. | |
| Also called a mortgage in principle (MIP) or decision in principle (DIP), all the same thing. | |
| Typically valid for around 3 months, and can be refreshed without affecting your credit report. | |
| Not the same as a mortgage offer, which only comes after a full, underwritten application. | |
| A major change in circumstances, like a new job or income change, usually means you'll need a new one. |
What is an agreement in principle?
An agreement in principle is produced after you complete a short form covering your income, personal details, and credit commitments. The lender runs a soft credit search based on that information and, if they’re comfortable, issues a document confirming they’d likely lend a specific amount, assuming your circumstances stay the same when you apply in full.
It’s the most useful thing you can have before you start viewing properties or making offers, since it shows lenders have already had a look at your situation and are broadly comfortable lending to you.
You may hear it called a few different things, an AIP, a mortgage in principle (MIP), or a decision in principle (DIP). They all mean the same thing.
Does an agreement in principle affect your credit score?
In theory, no. An AIP is based on a soft credit search, not a hard one, so it shouldn’t show up on your credit report in a way other lenders can see, and it shouldn’t affect your credit score.
What’s the difference between a soft search and a hard search?
A soft search leaves no visible trail. If you did a soft search with one lender and later a hard search with another, the second lender wouldn’t see evidence of the earlier soft search, though the first lender’s own records would show it was run. That’s why it’s called a soft footprint.
A hard search is different. Multiple hard searches can affect your credit score and are visible to other lenders when they carry out their own checks.
Does having multiple AIPs affect your credit score?
In theory, no. You can run more than one, and doing so shouldn’t have a significant impact on your credit report, since each one is a soft search. That said, it’s worth taking advice on your specific situation before running several, since individual circumstances can vary.
Agreement in principle vs mortgage offer: what’s the difference?
Agreement in principle vs mortgage offer
| Agreement in principle | Mortgage offer | |
|---|---|---|
| When it happens | Before you start viewing or offering on properties | After you've made an offer and applied in full |
| Credit check | Soft search, no visible mark on your file | Hard search, visible to other lenders |
| Tied to a property? | No, based on your general circumstances | Yes, against a specific property |
| How firm is it? | An indication, not a guarantee | A formal offer to lend |
An agreement in principle and a mortgage offer are completely different stages of the process. An AIP is a starting step, based on general information such as your income, employment, and existing credit commitments, checked with a soft search. A mortgage offer comes later, once you’ve made an offer on a specific property, submitted a full application, and the lender has underwritten your case, checked your documents in detail, and valued the property.
An AIP is what you’d show an estate agent or a new build developer to demonstrate what you can afford. A mortgage offer is the lender formally agreeing to lend a set amount against a specific property.
Do you need a new AIP if your circumstances change?
Yes, if there’s been a major change, a new job, a change in income, a significant new credit commitment, or a new child, you’d usually need a new agreement in principle, since the original one was based on a situation that no longer applies.
Not every change is significant enough to need a new AIP. If a lender wouldn’t view the change as affecting what they’d lend, your existing one may still stand. This is worth checking with your broker each time your situation shifts, rather than assuming either way.
Do estate agents require an agreement in principle, and does it make your offer stronger?
Some estate agents, particularly in the new build space, work with in-house brokers and are satisfied once you’ve been qualified by them directly. Others, without their own broker, will simply ask you to arrange an AIP yourself to confirm what you can borrow.
Having one can also strengthen an offer. Between two otherwise identical offers, one backed by an agreement in principle and one without, the AIP-backed offer is generally seen as more reliable, since a lender has already reviewed the buyer’s information and confirmed they’re comfortable lending.
When should you arrange an agreement in principle, and what do you need for it?
It’s worth arranging an AIP as soon as you know you want to buy, ideally before you start viewing properties. Speaking to a broker first, to confirm what you can afford based on your deposit and circumstances, means you’re ready to make an offer the moment you find somewhere you like, rather than scrambling once a property’s already attracting interest.
To arrange one, a broker will typically complete a fact-find covering your income, personal details, and credit commitments, and will usually ask for a payslip to verify your income. An agreement in principle is only as accurate as the information behind it, so this documentation stage matters even though it can feel like a lot for what’s meant to be an early step.
Can your mortgage still be declined after getting an agreement in principle?
Yes. An AIP can pass a soft search and still run into problems at the full application stage, when a hard search picks up something the soft search didn’t, your circumstances change in the meantime, or the lender isn’t satisfied with the property or your documents once you’ve formally applied.
It’s not a guarantee, but it’s as close to a yes as you can get from a lender without formally applying and having a case underwritten against a specific property.
Common mistakes to avoid with an agreement in principle
Common mistakes to avoid
Leaving it too late
Arranging an AIP only after finding a property risks losing out during a busy weekend of viewings when other buyers are already ready to move.
Skipping the documentation
Getting an AIP run without sharing full documents, like payslips, means details such as salary sacrifice can be missed, and the AIP may not reflect what a lender would actually count as income.
Should you get an agreement in principle through a broker or directly?
You can do either, but a broker generally gives you a wider view of the market. Going directly to your own bank means you’ll only see their rates and their view of your situation, and you’re left to choose between whatever they offer. A broker with access to multiple lenders can find an AIP that suits your circumstances specifically, and you’ll have that same contact to compare options across the market once you’re ready to make an offer.
Why buyers choose Heron Financial for their agreement in principle
Heron Financial is a fee-free, whole-of-market broker, so arranging an agreement in principle doesn’t cost you anything, and isn’t limited to a single lender’s criteria. Our advisers complete a full fact-find and credit check as part of the process, so your AIP reflects your actual circumstances from the outset, rather than generic assumptions that could unravel later at full application stage.
Frequently Asked Questions
Does an agreement in principle affect your credit score?
No, not in most cases. An AIP is based on a soft credit search rather than a hard one, so it leaves no visible trail that other lenders or credit reference agencies would pick up, and it shouldn't affect your credit score.
What's the difference between an agreement in principle and a mortgage offer?
An agreement in principle is an early, general indication of what a lender might lend you, based on a soft credit search. A mortgage offer comes later, once you've applied in full against a specific property, and the lender has underwritten your case and valued the property.
How long does an agreement in principle last?
Typically around three months, though this varies by lender. You can refresh it at any point without it affecting your credit report, so it's worth arranging well before you expect to need it.
Do I need a new agreement in principle if my circumstances change?
Usually, yes, if the change is significant, such as a new job, a change in income, or a new credit commitment. Smaller changes may not require a new one, so it's worth checking with a broker rather than assuming either way.
Can I still be declined for a mortgage after getting an agreement in principle?
Yes. An AIP isn't a guarantee. A hard credit search, a change in circumstances, or an issue with the property or your documents at full application stage can still lead to a decline, even after a successful AIP.
Does Heron Financial charge for arranging an agreement in principle?
No. Heron Financial is fee-free, so arranging an AIP, along with the rest of our mortgage advice, doesn't cost you anything.
Can Heron Financial get me an agreement in principle from any lender?
As a whole-of-market broker, Heron Financial can arrange an agreement in principle across a panel of lenders, rather than being limited to one bank's own products and criteria.