24 Hour Loans glossary of financial terms

Agreement in Principle

An agreement in principle is an arrangement that a lender may make with a consumer before they formally take out a loans product. This kind of arrangement is most often seen within the mortgage sector. If you?re looking to take out a mortgage then it can be difficult to know how much you can afford to spend on a property before you make your mortgage application. An agreement in principle will give you the relevant information you need and an informal commitment from the lender in question to allow you to borrow the money.

So, it may tell you how much you can borrow, for example, so you can start looking at suitable properties. An agreement in principle may also speed up the later mortgage process for you and may make it easier for you to secure a property as it will take you some way down the mortgage application process. The lender may, for example, run a credit rating on your application which will save you time later if you do decide to proceed with the loan. This agreement is not a formal mortgage offer and may be subject to change or withdrawal if your situation changes during the mortgage process or if you do not meet certain lender standards.