What is a Mortgage in Principle for Shared Ownership?

Posted June 13, 2024
What is a Mortgage in Principle for Shared Ownership?

A Mortgage in Principle (MIP), also known as an Agreement in Principle (AIP) or Decision in Principle (DIP), is a statement from a lender showing that they may lend you money for buying a home through Shared Ownership, based on an initial review of your financial situation. However, remember that this isn’t the final mortgage offer; it’s just an indication pending further checks.

This guide is to help you understand a Mortgage in Principle, it is not intended to provide you with financial or legal advice. Always consult a professional for financial and legal matters.

How to get a Mortgage in Principle for Shared Ownership

To get an MIP for Shared Ownership, you need to provide basic financial information, such as your income, other earnings, debts, and regular spending.

Lenders will check your credit score to assess your financial reliability. They can perform either ‘hard’ or ‘soft’ credit checks—the former might affect your credit score while the latter won’t. Always ask which type they will use, as multiple hard inquiries could lower your credit rating.

Benefits of having a Mortgage in Principle

Understanding your budget is crucial for first-time buyers to determine what they can afford before exploring property options through Shared Ownership.

Getting a Mortgage in Principle not only makes you appear more serious and financially ready to sellers, which is beneficial in competitive buying situations, but it also speeds up the mortgage application process by using previously provided financial data once you make an offer on a home. Having preliminary approval from lenders boosts buyer confidence, simplifying the home-buying process through Shared Ownership.


An MIP usually lasts between 60-90 days and needs renewal if not used within this period. It doesn’t guarantee final loan approval, since detailed reviews are required later on both your finances and the property conditions.

Next steps

Once you have secured an MIP for Shared Ownership, focus on finding homes within the budget limits set by the MIP. Then proceed with formal mortgage applications upon making property offers. These formal applications will require comprehensive evaluations by lenders about the property’s worth and deeper scrutiny of your finances.

Mortgage in Principle vs Agreement in Principle

“Mortgage in Principle” and “Agreement in Principle” are terms used interchangeably in the housing market. Both refer to a preliminary written estimate from a lender showing how much they might lend you based on an initial review of your finances.

This occurs before any detailed checks or formal mortgage applications.

Key points for both terms:

  • Preliminary Approval: These provide an early indication from a lender about the amount they might lend you, considering your income, debts, and credit history. This is not final but helps start the home-buying process.
  • Credit Checks: Both require a credit check—either hard or soft—depending on the lender’s practice. This initial check assesses your financial reliability.
  • Validity: Typically valid for 60-90 days, these estimates allow you time to find a home within this budget before needing to update your financial details.
  • Purpose: They help gauge what you might borrow and show sellers that you’re serious about buying—a plus in competitive markets. However, they don’t guarantee loan approval as further checks and an official application are necessary.

In summary, whether it’s called “Mortgage in Principle” or “Agreement in Principle,” both terms mean the same thing and serve as useful tools during the early stages of property purchasing through Shared Ownership. They indicate potential borrowing capacity and enhance credibility with sellers.