If you’re thinking of moving house or buying your first home, you may not know where to start with your search, and with the increasing interest rates you may be wondering what you will be able to borrow for your next purchase. While it is not compulsory to have an “Agreement in Principle” there are many reasons why most buyers are now adding this step to the process when looking for their next home.
If you are looking to sell your property or move to the area, read on to understand what an Agreement in Principle is and why it will benefit you in your property search. If you’re ready to move, take some time to browse our Properties for sale in Wentworth Estate, Properties for sale in Virginia Water and the surrounding areas. If you have any questions, you can also visit our award-winning website or call us on 01344 843000 and email us.
What is an Agreement in Principle?
An Agreement in Principle is a non-obligatory, free of charge assessment with a mortgage lender in regards to what they are likely to allow you to borrow. There are many terms used that you may come across with lenders, such as; “Mortgage in Principle”, “Decision in Principle” or even a “Mortgage Promise”.
They all mean the same thing. It is an initial review of your finances to provide an agreement from the lender of the sum of money that you can borrow for a mortgage. It checks your affordability at the current interest rates, giving you a guide of what your repayments will be per month.
Why is an Agreement in Principle helpful to me?
The figure that the lender provides to you is a very good guide to start you off with your new home search as it gives you the opportunity to decide on the budget you have available. It can also give you an idea of whether or not you may need to save more for your deposit or what price you need to aim to get for your sale if you have a property to sell. It may even surprise you that you’re able to spend more on a new home based on what you can afford monthly.
Once you know your budget it helps to narrow down your home search, meaning you can focus on properties that will be more affordable to you. While an Agreement in Principle is not a final mortgage offer, and the amount you can borrow can change between getting an Agreement in Principle and requesting a mortgage, it gives you a pretty good guide to get going with your home search and it shows your estate agent and the seller that you’re in a good position to buy. Getting yourself into a good position to buy makes you a more desirable candidate in the current competitive climate.
Is applying for an Agreement in Principle the same as applying for a mortgage?
The information you will provide to the lender will be the same as when applying for a mortgage, however they will only conduct a soft credit search meaning it won’t affect your credit score. It is a much quicker process than the full mortgage assessment while still giving you a good indication of what you can borrow.
You should be as honest as you can on your financial position, they may want to see bank statements and ask questions about your expenditure, utility bills and a number of months’ worth of payslips along with previous addresses. This initial agreement will also make your application for a mortgage offer quicker as the lender will already have all of your details and you’ll all have an idea of your financial position.
If you are ready to do so, now is a good time to lock in an actual mortgage offer at a reasonable rate as the rates are continuously going up, mortgage offers can last for a few months while you search or go through the process of buying a home. However; if you’re not ready to get a mortgage offer as you’ve just started your search then the Agreement in Principle is a very good starting point.
If you’re not sure where to start with lenders, speak to a Mortgage Broker
A decent Mortgage Broker will be able to find lenders and deals that are suitable for you. While some may charge a fee to do so, it will cost very little. If they can find you a great deal it can save you money over the length of your mortgage term.
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If you are thinking of moving to the area or buying a property to rent, make sure you take a look at our amazing portfolio of Properties for sale in Virginia Water and the surrounding areas. If you’d like to speak to someone about Properties to let in Virginia Water, a member of our expert team would be happy to help. You can call us on 01344 843000 or email us. You can also follow us on Facebook, Twitter, Instagram, and LinkedIn.
