You will need an AIP – Agreement in Principle – if you are buying a house with a Mortgage. Usually, most investors put 25-30% deposit down and get the rest on an interest only Mortgage. This is because it keeps the monthly payments down and allows you to retain the rest of your capital for further investments. So getting an Agreement in Principle with a bank, building society or mortgage lender is proof that you can get the mortgage for the funds needed. You would need to supply proof of the deposit too, these days. But is this a. guarantee that your house sale will go through with the mortgage?Just how reliable is a mortgage agreement in principle?
What do you need for an AIP?
Usually, when applying for an Agreement in Principle they ask you for:
- ID (passport or divers license)
- Last 3-6 months payslips
- Last 3 months bank accounts
Needless to say that you should be honest about all of these, otherwise you could jeopardise your mortgage and may be committing a fraudulent offence. If you are planning to get a mortgage over the next few months then be aware of any large and irregular transactions going through your account. Also limit gambling from your main account – lenders don’t like to see gambling transactions.
If it’s who you bank with – it’s probably a relatively safe bet!
The good news is that an AIP is usually quite secure and although it doesn’t 100% guarantee that you will get that mortgage, the chances are that you are likely to get a mortgage. If the AIP you have received is from your bank then it is probably a relatively safe bet, because they can see all of your transactions going in and out of your bank, and they may have also already done credit checks.
When an AIP doesn’t come good
Most AIP’s are usually subject to credit checks, and this is when your mortgage can potentially fall through – if there are any bad debts or CCJs that you didn’t declare in the initial enquiry and these show up when the mortgage lender does the credit check then your mortgage could fall through.
If you are working with a Mortgage Broker and your AIP doesn’t result in a successful mortgage application then don’t worry too much….it is probably that your mortgage advisor can switch to another lender and find one that does work. I spoke to Alex Penny at Dynamo who said that he had even been able to secure a mortgage for a landlord who had a CCJ against him!
So how Reliable is a Mortgage Agreement in Principle?
Overall, an AIP is usually a good indicator that you are highly likely to get a mortgage. However, an AIP in not a 100% guarantee. Keep an eye on your bank transactions, keep your credit rating excellent by paying everything by direct debit and not missing payments and save a healthy deposit. This will give you the best chance of your mortgage going through.