Author: Monday Team

A mortgage Agreement in Principle (AIP) is a written indication from a lender of how much it may be prepared to lend you, based on an initial assessment of the information you provide.

It’s sometimes called:

• Decision in Principle (DIP)
• Mortgage in Principle
• Lending in Principle

They all mean broadly the same thing.

An Agreement in Principle is not a full mortgage offer, but it’s an important early step if you’re planning to buy a property.

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What does an Agreement in Principle show?

An Agreement in Principle usually gives you:

• An indication of how much the lender may be prepared to lend
• An initial indication that the information you’ve provided fits the lender’s preliminary criteria
• A clearer idea of your potential mortgage borrowing before you make a full application

The lender may also carry out a credit search at this stage. Whether that is a soft or hard search depends on the lender.

Estate agents may ask to see an AIP, and having one can help show a seller that you’ve already considered how you’ll finance the purchase. It is not a guarantee that the mortgage will ultimately be approved.

If you’re going for a first-time buyer mortgage, having an AIP can make your offer stronger compared to someone who hasn’t arranged one.

Is an Agreement in Principle a guarantee?

No.

This is one of the most important things to understand.

An Agreement in Principle is based on the information you provide at the time. When you submit a full mortgage application, the lender will carry out:

• A full credit check
• Detailed affordability assessment
• Document checks (payslips, bank statements, tax returns)
• A valuation of the property

If anything changes or doesn’t match the original information, the lender can reduce the loan amount or decline the application.

Think of an Agreement in Principle as a green light to start house hunting — not a legally binding promise.

	Agreement in Principle	Mortgage offer
Purpose	Early indication of potential borrowing	Formal offer for a mortgage
Assessment	Based on initial information and checks	Full application, evidence and underwriting
Property	Usually obtained before you have a specific property	Normally relates to the property being purchased
Guaranteed?	No	Formal offer, subject to its conditions
Next step	House hunting or making an offer	Progressing towards exchange and completion

How does an Agreement in Principle work?

The process is usually straightforward.

You’ll provide details such as:

• Income (salary, bonuses, self-employed income)
• Monthly outgoings
• Existing debts
• Mortgage deposit amount
• Employment status
• Basic personal details

The lender will then assess affordability using their criteria and run either a soft or hard credit check.

If the lender can give you an AIP, it will provide an indication of how much it may be prepared to lend.

Some lenders can provide an online decision quickly, although the process and timing vary.

If you’re still working out your budget, our mortgage affordability calculator can give you an early estimate before you request an AIP.

Does an Agreement in Principle affect my credit score?

It depends on the lender.

There are two types of credit checks:

Soft credit check

• Doesn’t leave a visible footprint for other lenders
• Doesn’t impact your credit score
• Used by many lenders for AIPs

Hard credit check

• Leaves a visible mark on your credit file
• Can slightly impact your score
• Some lenders still use this for AIPs

Before requesting several AIPs, check whether each lender uses a soft or hard credit search. Soft searches do not affect your credit score or appear to other lenders, while repeated hard searches can affect your credit profile.

A broker can help manage this and avoid unnecessary credit searches.

How long does an Agreement in Principle last?

Agreements in Principle are typically valid for around 30 to 90 days, although the exact period depends on the lender.

If it expires, you can usually renew it, provided your circumstances haven’t changed.

If your income, job, debts or credit profile changes, it’s important to update your details before proceeding.

When should I get an Agreement in Principle?

You should consider getting one:

• Before viewing properties seriously
• Before making an offer
• If an estate agent requests proof of affordability
• When you want clarity on your budget

It helps avoid disappointment. There’s little point falling in love with a £400,000 property if a lender is only willing to lend £320,000.

An AIP sets realistic expectations early.

Do I need an Agreement in Principle to make an offer?

Technically, no. But in practice, often yes.

No. An Agreement in Principle is not a legal requirement for making an offer on a property.

However, an estate agent may ask how you plan to fund the purchase, and some may ask to see an AIP. Having one can also help demonstrate to the seller that you’ve already explored your mortgage options.

GOV.UK’s home-buying guidance recommends letting the seller know if you have a Decision in Principle when making an offer.

What if I’m self-employed?

If you’re self-employed, you can still get an Agreement in Principle, but the income used can depend on how you trade and the lender’s criteria.

A lender may consider:

• How long you’ve been trading
• Sole-trader or partnership profits
• Salary and dividends for company directors
• Company net profit at some lenders
• Contract income for some contractors

The amount used can also depend on how your income has changed over recent years.

Some lenders are more flexible than others. If you only have one year of accounts, choice may be more limited.

What if I have bad credit?

It may still be possible to get an Agreement in Principle if you have past credit issues such as:

• Defaults
• CCJs
• Missed payments

However:

• The deposit required may be higher
• The interest rate may be higher
• Fewer lenders may be available

Be honest when entering your details. Incorrect information is one of the most common reasons full applications are later declined.

What happens after an Agreement in Principle?

Once your offer on a property is accepted, the next step is to submit a full mortgage application.

At that stage, the lender will:

1. Request supporting documents
2. Carry out a full credit check
3. Arrange a property valuation
4. Underwrite the case

If everything checks out, they’ll issue a formal mortgage offer.

Only at that stage is the lender committing to the loan, subject to conditions.

Can my Agreement in Principle amount change?

Yes.

The final loan amount may change if:

• Interest rates move
• Your circumstances change
• The property valuation is lower than expected
• The lender’s criteria change

That’s why it’s important not to stretch your budget right up to the maximum shown on your AIP.

Can a mortgage be declined after an Agreement in Principle?

Yes. An Agreement in Principle is only an initial indication, so a lender can still reduce the amount or decline the full mortgage application.

This could happen if:

• The documents you provide do not support the information given at AIP stage
• Your income, debts or other circumstances change
• Further credit checks reveal information that affects the application
• The property does not meet the lender’s criteria
• The application does not pass the lender’s full affordability or underwriting checks

This does not necessarily mean another lender will reach the same decision, because criteria vary.

Is an Agreement in Principle free?

Getting an Agreement in Principle directly from a lender is usually free.

If you use a mortgage broker or adviser, they may charge a fee for their advice or service, so check this before proceeding. An AIP does not usually commit you to taking a mortgage with the lender that provided it. Our guide to questions for your first mortgage appointment can help you prepare for that conversation.

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Frequently asked questions

Is a Decision in Principle the same as an Agreement in Principle?

Usually, yes. Decision in Principle, Agreement in Principle and Mortgage in Principle are different names lenders use for broadly the same type of initial mortgage assessment.

Can I get more than one Agreement in Principle?

Yes, although you should check whether each lender uses a soft or hard credit search before making several applications. Multiple soft searches won’t affect your credit score, but repeated hard searches can.

Can I change lender after getting an Agreement in Principle?

Yes. Getting an AIP from one lender does not normally mean you have to make your full mortgage application with that lender. GOV.UK explicitly says a Decision in Principle from one provider does not oblige you to use them.

What happens if my Agreement in Principle expires?

You can normally request another one. The lender will reassess your circumstances using its criteria at that time.

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Final thoughts

An Agreement in Principle is a simple but powerful step in the mortgage process.

It gives you:

• Clarity on what you can afford
• Confidence when making offers
• Credibility with estate agents
• A smoother path to a full application

It isn’t a guarantee, but it significantly reduces uncertainty early on.

If you’re unsure how much you could borrow, or whether your credit profile will pass initial checks, arranging an Agreement in Principle is often the best place to start.

If you’re buying a home, one of the first questions you’ll ask is: how much deposit do I actually need?

The short answer: most buyers will usually need at least 5% of the property price, although some no-deposit mortgages are available in limited circumstances.

The amount you put down can affect the mortgage deals and rates available to you, as well as how much you need to borrow.

Here’s what you need to know.

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What is a mortgage deposit?

Your deposit is the part of the property price that isn’t covered by your mortgage. It might come from your own savings, a gifted deposit, or equity from a property you’re selling.

For example:

• Buying price: £250,000
• 10% deposit: £25,000
• Mortgage: £225,000

The size of your deposit determines your Loan to Value (LTV). This is the percentage of the property price you’re borrowing.

• 95% LTV = 5% deposit
• 90% LTV = 10% deposit
• 85% LTV = 15% deposit
• 80% LTV = 20% deposit

You can also use our mortgage deposit calculator to compare how different deposit percentages affect the cash you need upfront and the amount you need to borrow.

A lower LTV generally means less risk for the lender, which can give you access to a wider range of mortgage products and potentially lower interest rates.

Minimum deposit: 5%

95% LTV mortgages are available from a range of UK lenders, allowing eligible buyers to purchase with a 5% deposit.

The government’s permanent Mortgage Guarantee Scheme also supports the availability of mortgages between 91% and 95% LTV, although not every 95% mortgage is necessarily offered through the scheme.

With a 5% deposit:

• You still need to meet the lender’s normal affordability and underwriting criteria
• Rates can be higher than at lower loan-to-value levels
• You may have fewer lender or product options
• Your credit history can affect which high-LTV mortgages are available to you

Is 10% a better option?

Increasing your deposit from 5% to 10% reduces your mortgage from 95% LTV to 90% LTV, which can give you access to a wider range of mortgage products.

Using the same £300,000 property:

• 10% deposit: £30,000
• Mortgage: £270,000

Potential benefits of a 10% deposit include:

• Access to a wider range of mortgage products
• Potentially lower rates than at 95% LTV
• A smaller mortgage and potentially lower monthly payments
• A larger equity buffer if property values fall

Whether saving the extra 5% is worthwhile depends on the rates available at 90% LTV, how long it would take you to save and how much cash you want to keep aside after buying.

What if I have 15% or 20%?

Moving from 90% LTV to 85% or 80% LTV can open up additional mortgage products and may reduce the rate available to you. The exact benefit depends on how lenders are pricing their mortgages at the time.

Example on £300,000:

• 15% deposit: £45,000
• 20% deposit: £60,000

With a larger deposit:

• You borrow less overall
• You may have access to lower mortgage rates
• Your monthly repayments may be lower
• A smaller mortgage may be easier to fit within your affordability

If you’re close to one of these deposit “bands”, it’s worth checking how much difference it makes to your payments.

Does the type of mortgage affect the deposit required?

Yes, the deposit requirements depend on the type of mortgage you’re going for.

First-time buyers

A 5% deposit is a common starting point, although limited no-deposit options also exist. For more on affordability, deposits and the buying process, see our first-time buyer mortgage guide.

First-time buyers considering a participating new-build home may also want to read our guide to the Your First Home scheme. The proposed scheme is expected to combine a 2.5% buyer deposit with a 20% government-backed equity loan, but it is not yet open.

Home movers

5% deposit options may also be available, with equity from your current property often forming some or all of the deposit.

Buy-to-let

Buy-to-let mortgages usually require a larger deposit than residential mortgages. The exact minimum depends on the lender, property and rental-income assessment. You can use our buy-to-let mortgage calculator to see how the deposit, mortgage amount and rental income interact.

New-build properties

Some lenders apply different maximum loan-to-value limits to new-build properties, particularly flats, so you may need a larger deposit.

Self-employed applicants

Being self-employed does not automatically mean you need a bigger deposit. Your income evidence, trading history and lender choice can be more important.

Adverse credit

Missed payments, defaults or other credit issues can reduce the number of high-LTV options available, and some cases may require a larger deposit.

Can I use a gifted deposit?

Yes. Many buyers use a gifted deposit from parents or family.

Lenders usually require:

• A signed gifted deposit letter
• Proof the funds are a gift, not a loan
• ID and source-of-funds checks

If the money must be repaid, it won’t usually be treated as a gifted deposit. The lender will need to know about any repayment obligation, which may also affect affordability.

What other costs should I budget for?

Your deposit isn’t the only upfront cost.

You may also need to budget for:

• Legal or conveyancing fees
• Survey costs
• Valuation fees, where charged
• Mortgage product or arrangement fees
• Broker fees, where applicable
• Property transaction tax, depending on where you’re buying and your circumstances
• Buildings insurance
• Moving costs

Property tax differs across the UK: England and Northern Ireland use Stamp Duty Land Tax, Scotland uses Land and Buildings Transaction Tax, and Wales uses Land Transaction Tax. The amount you pay can vary significantly, so it’s better to calculate this separately rather than assume a fixed percentage for buying costs.

If you’re buying in an area covered by it, our Stamp Duty calculator can help you estimate the tax separately from your deposit.

Is a bigger deposit always better?

Not necessarily. A bigger deposit can improve the mortgage numbers because you’re borrowing less, and it may give you access to lower rates.

But using more of your savings also means having less cash left for fees, moving costs, repairs and emergencies.

However, waiting years to save more could mean:

• Property prices rising
• Rent payments continuing
• Missing a good opportunity

It’s about balance. Whether to buy with a 5% deposit or wait until you have 10% depends on your finances, the mortgage options available and how much money you would have left after completion.

What deposit do I need personally?

The right deposit depends on:

• Your income
• Your credit history
• The type of property
• The lender’s criteria
• Current mortgage rates

Two buyers with identical deposits can receive very different mortgage offers depending on their circumstances.

Next step

If you’re unsure whether 5%, 10% or 15% is realistic for you, a quick affordability review can give clarity.

We can:

• Check how much you could borrow
• Show you rate differences at different deposit levels
• Explain whether waiting to save more would meaningfully improve your options

There’s no obligation — just clear guidance so you can plan properly.