A mortgage in principle, known more commonly as an agreement in principle (AIP), is a helpful tool to estimate how much you could borrow before formally applying for a mortgage.
It usually involves a soft credit check, so your credit score is unlikely to be affected, and you are under no obligation to proceed.
At Londonmoneyman, we can usually obtain an AIP for our customers within 24 hours of their initial mortgage appointment. The AIP typically lasts for 30-90 days, but if it expires, we can help you renew it.
To obtain a mortgage agreement in principle, you can either contact a mortgage lender directly or seek the help of a trusted mortgage broker in London, like us. You can book a free mortgage appointment with our expert mortgage advisors in London by getting in touch today.
During the appointment, you will need to provide details about your income, employment, credit history, and other personal information to assess your eligibility for a mortgage and get an estimate of your borrowing capacity.
Our team can usually obtain your AIP within 24 hours of the initial appointment.
Prior to beginning your property search, it is recommended to obtain a mortgage agreement in principle to estimate how much you can borrow, which will prevent you from looking at properties that are out of your budget range.
Furthermore, having an agreement in principle can give you a competitive edge when making an offer on a property, as sellers and estate agents may consider you as a serious buyer.
An agreement in principle is not a guarantee of obtaining a mortgage, but it is a useful aid during the home buying process.
To obtain an agreement in principle, a mortgage advisor in London will require personal information from you to forward to the mortgage lender.
This includes your personal details such as your name, date of birth, and current address, as well as your employment status and income details.
Mortgage lenders will also need to know about your regular outgoings, credit history, and affordability, to determine your eligibility for a mortgage. It is important to note that further documentation, such as bank statements or proof of income, may be required before a final decision is made.
An agreement in principle (AIP) is a document that shows how much a mortgage lender may lend you, based on the information you’ve provided. Do remember though, it does not guarantee that you’ll receive a mortgage offer, nor does it mean there is any legal obligation for you to proceed.
On the other hand, a mortgage offer is a formal offer from a mortgage lender that confirms their willingness to lend to you after conducting credit and affordability checks. This is one of the final stages in the mortgage process.
If you accept the mortgage offer, it becomes a legally binding document that sets out the terms and conditions of your mortgage, including the interest rate, the term of the mortgage, and any associated fees and charges.
To get to this stage, you will need to provide the mortgage lender (through your mortgage broker in London, if you choose to use one) with more detailed information and undergo a full credit check. Additionally, the mortgage lender will require a valuation of the property you intend to purchase.
Once you receive your mortgage offer, you can proceed with the property purchase, subject to meeting any conditions specified in the offer.
In summary, an agreement in principle provides an estimate of how much you can borrow, while a mortgage offer is a legally binding agreement between you and the mortgage lender that sets out the specific terms and conditions of your mortgage.
Typically, obtaining an agreement in principle for a mortgage will not have a significant impact on your credit score. This is because most mortgage lenders only conduct a soft credit check during the AIP process, which does not leave a visible mark on your credit report.
It’s important to be aware that some mortgage lenders may perform a hard credit check as part of the AIP process, which can leave a visible record on your credit report. If you apply for multiple AIPs with different mortgage lenders in a short period of time, this could potentially impact your credit score.
It’s important to keep in mind that a mortgage application itself will usually involve a hard credit check, which can also affect your credit score.
Therefore, it’s generally advised that you limit the number of mortgage applications you make and only apply for an agreement in principle when you are serious about purchasing a property.
Obtaining an agreement in principle for a mortgage can provide several benefits for you when it comes to the home buying process.
Firstly, it allows you to determine the amount you can realistically borrow, helping you focus your property search within your price range. This can save you time and prevent the disappointment of finding a property that you cannot afford.
Secondly, having an AIP can give you an advantage over other buyers. Sellers may be more inclined to accept an offer from someone who already has an agreement in principle, as it demonstrates that they are a serious buyer actively seeking a mortgage.
Finally, an AIP can help expedite the mortgage application process once you have found a property you wish to purchase. Since the mortgage lender has already assessed your financial situation and eligibility, they may be able to process your application more quickly and efficiently.
Overall, obtaining an agreement in principle can be a valuable tool for anyone looking to buy a property, as it provides clarity on how much you can borrow, increases your chances of being accepted as a buyer, and can streamline the mortgage application process.
Getting an agreement in principle for a mortgage is usually free. It’s just a document that specifies the amount a mortgage lender is willing to lend you based on the information you’ve given them. You are not obliged to make any financial commitment with an agreement in principle.
If you are declined for a mortgage agreement in principle, it indicates that the mortgage lender has determined that you do not qualify for the amount of mortgage you have requested. There may be various reasons why this has occurred.
It is crucial to identify the cause of the rejection. You may need to reassess your financial situation or credit history, or you may need to provide additional information to the mortgage lender.
In some cases, it may be necessary to look for a different mortgage lender who is willing to lend close to, if not the full amount that you are seeking. Keep in mind that being refused an AIP does not automatically imply that you will be denied a full mortgage application.
When you submit a complete application, the mortgage lender will examine your financial situation and credit history more closely, and they may offer you a different amount or a different type of mortgage.
Moreover, applying for multiple agreement in principle with different lenders can have a negative impact on your credit score. As a result, it is important to conduct research ahead of time.
Having a mortgage broker in London can help you in locating the right mortgage lender, hopefully on your first attempt.
If you are considering first time buyer mortgages in London or home mover mortgages in London, it is advisable to speak with a mortgage broker in London to obtain your agreement in principle, before making any offers on a property.
Our team can typically secure an AIP for you within 24 hours of your initial mortgage appointment, providing you with valuable information as you progress through the mortgage process.
Book in for a free mortgage appointment today and we’ll work to obtain your agreement in principle as soon as possible, as you embark on your mortgage journey with the support of a trusted mortgage broker in London.
Owning a property, be it a family home or a buy to let in London, is considered an investment that goes beyond just providing a roof over your head. It is a valuable asset that can be sold or passed down to future generations.
Given the constantly fluctuating property market, there may be times when property prices rise significantly. During these peaks, it may be wise to consider your options for a remortgage in London.
By doing so, you may be able to access more favorable loan to value ratios, resulting in better interest rates and terms.
Loan to value (LTV) is a percentage of the property’s open market value, versus the amount of mortgage you are looking to borrow. For example, if you purchase a property for £100,000 with a deposit of £10,000 (10%), you will require a 90% LTV mortgage.
Mortgage lenders offer different brackets or tiers of LTV, typically ranging from 60% to 95%. The LTV brackets available vary depending on the mortgage lender.
Lower LTV mortgages generally offer more competitive interest rates. For instance, if you had a lower LTV, such as 73% in the example above, you might be able to obtain a more competitive interest rate when remortgaging in London.
Other factors, such as market conditions, can also affect the interest rate when remortgaging. The lower the LTV, the less risk you pose to the mortgage lender, which is why lower LTV mortgages usually offer more competitive rates.
To access better rates and terms when remortgaging in London, it’s important to determine the current value of your property.
This can be done through a valuation, which is necessary when switching to a new mortgage lender. The mortgage lender will want to know the value of the property they will be lending against to assess their risk.
There are two types of property valuation: an Automated Valuation Model (AVM) or a physical valuation.
An AVM is a database that cross-references similar properties in the area to determine the value, while a physical valuation involves an inspector coming to your home to assess its true value.
If you’ve made any home improvements or extensions that an AVM could miss, a physical valuation would be more accurate. You can discuss this with your mortgage advisor in London during your free appointment.
Whilst the equity that you have sitting in your home can oftentimes be utilised as a means of accessing better deals, you may instead want to take out a remortgage in London, so that you can release the equity. There are lots of reasons people do this, such as for making home improvements.
When it comes to taking out a remortgage in London so that you can release equity, you must carefully plan what it is you’d like to do. In virtually all circumstances, you’ll have a new mortgage to replace the old one (that is how a remortgage works), whilst moving onto a higher loan to value.
Because you’ll be moving onto a higher loan to value, you’ll find that you are almost guaranteed to have higher monthly mortgage payments.
Many will hope that their investments in their home, all the home improvements that have been carried out, will see the value of the home increase. This means that when the time comes to remortgage in London once more, your loan to value should be lower again.
It really all comes down to gauging the markets, making sure that everything is incredibly well thought out, especially with it being for such a large investment and your home. A mortgage advisor in London will review your plans and advise on the best steps for you to take.
In some instances, you may find that you are wanting to take out a remortgage in London early. Whilst enquiring about your options before your fixed-term ends is technically early, you may possibly be able to remortgage in London even before that.
The downside to taking out a remortgage in London early, is that you will usually find yourself having to pay an early repayment charge (ERC), due to breaching your contractually agreed terms on your mortgage deal.
House prices can be quite difficult to gauge, as the market is ever-changing and always unpredictable. Whilst you may think it could be a good idea for you to do this, it may not actually be financially viable for this to be achieved.
People will generally only leave their mortgage early if there is a genuinely good reason for this to be done. This is why speaking to an expert mortgage broker in London is highly recommended before doing so.
A good example of where this would apply, could be the COVID-19 pandemic. During this time period, the Bank of England base rate dropped to records lows. People who were set to leave their fixed-deal around that time, would benefit from their remortgage in London, inheriting lower interest rates.
That said though, if you were still a year away from being able to remortgage in London, you might have looked to remortgage early, to make sure you can fix-in onto those lower interest rates for longer, to reap the benefits of them.
This is quite a niche example, however, as times were very strange and mortgage lenders were pulling a lot of their products, which caused limitations to mortgage options. Even with that in mind, it shows how remortgaging early could actually be helpful.
If you have seen your home rise in value, that too could be a good time to take out an early remortgage in London, as the general costs may be greatly outweighed by the costs saved from you being able to access a much lower loan to value.
Once again, you’ll have to factor in a likely early repayment charge (a product transfer could see that waived), as well as your possible arrangement fees, valuations fees and solicitors fees on a new mortgage.
If you are able to demonstrate that your savings will definitely be able to outweigh the fees spent, then this may be something you could look at doing. As always though, it is recommended that you have a chat with a mortgage broker in London, in order to understand your options.
The UK government designed the Shared Ownership Scheme with the intention of helping individuals to purchase own property. This type of mortgage is available to permanent UK residents, including both first time buyers in London or former homeowners who are finding it difficult to purchase a new home.
In order for you to be able to qualify for a Shared Ownership mortgage in London, your household income must be less than £90,000. This may differ in other areas of the country.
Additionally, you will almost always be purchasing your property on a leasehold basis, which means you will be purchasing it for a set period of time.
Under the Shared Ownership Scheme, you are able to purchase a portion of your homes value, via your Shared Ownership mortgage in London. The percentage that you purchase will typically be between 25-75% of the property value.
The remaining portion that you don’t purchase will be paid as a rental cost, including any service charges or ground rent, which will be charged at a lower cost than market value and is paid to a local housing association.
The Shared Ownership Scheme went through some fairly significant changes in April 2021, as part of the UK government’s Affordable Homes Programme. These changes are particularly noteworthy if you’re familiar with how the scheme once worked.
Among the changes to this, the minimum percentage that is required for a property share purchase was lowered, meaning in some cases, you can purchase as low as 10%, down from the previous 25%.
Furthermore, it is now possible to purchase shares in 1% increments, as opposed to previously where you could only purchase 5-10% minimum.
In addition to the latter, the fees that typically come along with purchasing these extra shares has also been reduced, with maintenance and repair costs typically now being covered for the first 10 years of your home ownership, by the landlord, rather than yourself.
If you had previously taken out a Shared Ownership mortgage in London before these changes took effect, it is entirely possible that these new rules could actually now apply to you, but it’s always recommended you check with your mortgage lender first, as this may still vary per case.
Before you look at taking on the mortgage side of your process, you will first need to make sure that you can even qualify for Shared Ownership in London. In order to do this, you’ll first need to contact with your local Help to Buy agent in the area you wish to purchase your home in.
When you speak to this agent, you will usually need to provide them with various bits of information, such as what your income is, the amount of budget you have, which area your preferred property would be in and your credit history.
Once your eligibility is confirmed, it’s time to make a start on your mortgage.
A trusted and experienced mortgage broker in London would most likely be your best port of call when it comes to this, as not every mortgage lender offers deals on a Shared Ownership in London. The amount you can borrow typically depends on things like income and other fees included, such as rent.
As is often the case with most mortgages, there are both pros and cons to having a Shared Ownership mortgage in London. To give this a balanced view, it’s worth noting as said above, that not all mortgage lenders will offer mortgage deals to those using a Shared Ownership in London.
That being said, there are still more than enough mortgage lenders out there, including ones we have on panel, that can offer these types of mortgages. Furthermore, Shared Ownership mortgages in London can offer a sense of long-term stability, as you become both owner and occupier, simultaneously.
Deposits may often be an area of concern, especially for first time buyers in London, as saving for one can be challenging. Thankfully, deposits for Shared Ownership mortgages are typically much lower than they would be for open market purchases.
Whilst your deposit may still need to be, for example, 5%, it’ll only be 5% on the shares you’re purchasing. If you only want to purchase a 50% share, you’d be paying 5% on whatever 50% of the property value is.
Shared Ownership mortgages in London also make mortgages more accessible to those who are perhaps on a lower wage bracket.
Whilst these positives sound good, you have to remember that you would also be you would be paying for ground rent and service charges. Typically speaking, you can take part in “staircasing”, where you buy more shares as time goes on, when you come into the funds.
In most cases, you will be able to purchase up to 100% of the property price, where at this point, you would no longer need to pay a monthly rent. That said, your mortgage, ground rent and service charges would still apply. In other cases, you may only be allowed to purchase up to 80%.
Further to the last point, once you hit the 80% mark or higher, you will have to pay stamp duty land tax, though if you’re a first time buyer in London, this may not apply, depending on where in London you’re going to be living. Speak to a mortgage advisor in London to learn more.
Even though stamp duty can prove to be quite a costly addition to the other fees you will already have, your monthly mortgage payments can still be much cheaper than paying for an outright mortgage. It can also even be cheaper in some regards, than privately renting.
Speaking of privately renting, you will also benefit from having a tenure security, unlike you would going private. So long as you maintain all of your monthly mortgage payments, you will be able to remain within your home for your lease’s duration, which is typically between 99 and 125 years.
Because your home will be part owned by someone else, you will need to obtain permission from the appropriate housing provider prior to making any structural changes to your home. This can take away a sense of freedom you would otherwise have, by owning it outright.
After you have owned your home for a while, you may eventually decide that you do not wish to remain there and look to sell the property, before you look at moving elsewhere. With the majority of mortgage types, this would be fairly simple, so long as you have gone through your fixed period.
When it comes to Shared Ownership in London, it works a little differently.
Your ability to sell a home with a Shared Ownership mortgage in London will entirely depend on how much of the property you actually own, from the shares you have purchased. You’ll typically need to own 100% of the property, before selling the property can be an option for you.
It is important that you remember, however, that the housing association generally receives ‘first refusal’ rights, for the first 21 years after you have purchased your home. This means they are, by law, able to make a property purchase offer to you, before you put it on the open market.
If you do not own 100% of the property, you will have to look at purchasing all of the remaining shares, before you can look at selling the property.
A Shared Ownership mortgage in London can be great for first time buyers in London, who have been dreaming of getting their own property, but only have a smaller deposit to work with. Using a Shared Ownership in London can help you to achieve all of your goals.
That being said though, having a Shared Ownership mortgage in London can often prove to be a complicated journey and there can be a lot for you to work with, especially when you include all the potential fees. You must make sure that you are fully prepared and aware of all the contract details.
At the end of the day, it all comes down to personal preference. By booking in for a free mortgage appointment with a trusted and dedicated mortgage broker in London, you’ll get to speak with an expert mortgage advisor in London, with plenty of time to prepare!
You can learn more about a Shared Ownership mortgage in London by visiting the government OwnYourHome website.
The world of buy to let mortgages in London and making investments in property can prove to be incredibly beneficial to some, allowing for landlords to earn further profits from the properties in their portfolio. Beyond just your standard type of buy to let mortgage, however, there are a variety of other buy to let mortgages available.
One of the variations that is more closely related to a buy to let mortgage, is a let to buy mortgage in London. There are also HMO’s, which are houses of multiple occupation and holiday let mortgages in London. The latter is to be the focus of this article.
A holiday let in London is another form of a buy to let in London, that will see landlords renting out a home temporarily to both tourists and visitors, during their travels to that location. Tenancies are usually done as short-term ones and there will generally be a few of these throughout the year.
Because of the nature of the holidaying industry, there is more than likely going to be a few periods during the year where the holiday season dies down a little bit, meaning you won’t always have a consistent income. This can mean mortgage lending criteria will be much stricter.
As is the case with any mortgage, you will of course need to make sure that you match up against the strict mortgage lending criteria of a holiday let mortgage in London, before your mortgage applicant can be approved. Criteria can vary between different mortgage lenders, though typically it is the same criteria throughout.
For the most part, you will find that you need to have at least a 25% deposit, a minimum income per year (in addition to the rental income you will be making), a rental income that can help to cover your monthly mortgage payments (with further margins to meet) and also holiday home insurance.
The latter will help to cover you in the event of any possible booking cancellations or loss of income you could be faced with. Holiday homes are typically seen as a much higher risk investment purchase, as it is incredibly likely that there will be periods when you are not making a great deal of income, if any at all. As such, interest rates will more than likely be higher.
At the end of the day, this is all about how you weigh up the positives and negatives of holiday let mortgages in London. They are able to help provide you with additional income, with the bonus of you being able to charge a premium for school holidays or peak seasons, due to the high demand.
In addition to this, you may also have the possibility of deducting expenses from fully furnished holiday homes, though this can vary. Some landlords may find that they have certain tax benefits, though there will be specific criteria for them to meet and we highly suggest speaking with a qualified tax advisor in London to learn more.
Further to this point, whilst you could potentially charge more during the peak seasons, you could find it a bit of a challenge to even buy a property at all. Tourist hotspots will also come with premiums on price, though if you can look past that, you would also likely make more rental profit from those locations.
Interest rates can be a negative for some, as you will most likely be paying much more on interest rates. Depending on the amount of properties you have to your name, you could also find that you are paying a lot more on stamp duty tax as well. When you combine this with running costs and general maintenance, it soon all adds up.
Once again though, this will all depend on the location of your property and the amount you are charging on rent, especially in peak seasons. In more popular times of the year, you may be able to lessen the impact of these factors. Still, when there are lengths of time where no income is being made, you do need to make up the shortfall.
Speaking of having periods of downtime, whilst financially this is a negative, it can contribute to a truly eyebrow raising area of holiday lets in London. This being, that you can use it as a holiday home for yourself, when not fully booked! This is contrary to a buy to let mortgage in London, where you cannot live in your property at all.
Really it all comes down to what works best for you at that point. Sure there are many different costs to think about, though if you play your cards right, the profit could make it all worth it and leave you with a place to go and spend some much needed “me-time” when the property is not being occupied.
A standard buy to let mortgage in London will be for a rental property. That property is typically offered to long-term secure tenants. Tenancy lengths are, as a general minimum duration, between 6-12 months, with individual terms that will be set by a landlord. The amount you are able to borrow will depend on potential rent, as opposed to your income.
On the flip side, holiday let mortgages in London are usually only intended for the short-term. A standard holiday let mortgage tenancy is around a month at a time and can lead to fluctuations in your income, as with holiday lets there are usually off-peak seasons where securing a short-term tenancy can be a little challenging.
In order to figure out roughly how much you are able to borrow, they will be looking at a few different things like potential for rental income more in-depth (reviewing the various lettings seasons), as well as taking a look at your personal income.