What a Mortgage in Principle actually is
A Mortgage in Principle (also called an Agreement in Principle or Decision in Principle) is a written indication from a lender that, based on the information you've supplied, they would in principle be willing to lend you up to a stated figure. It is not a binding mortgage offer. Lenders run a soft credit search and run your declared income and outgoings through their affordability calculator to arrive at the figure. The MIP itself sits between you and the lender as a confidence document — it tells estate agents and sellers that you're a credible buyer and gives you a working number to budget against.
Crucially, the MIP is calculated as: income × the lender's multiple, capped by affordability and LTV criteria. The lender's own money is the only thing being quoted. Your deposit is not part of the calculation and is not part of the figure shown on the MIP certificate.
How the maths actually works
Let's run a typical first-time-buyer example to make the relationship concrete.
- Combined income: £60,000.
- Lender's income multiple: 4.5×.
- Indicative maximum loan: £270,000.
- Your deposit: £30,000.
- MIP issued: £270,000.
That £270,000 MIP figure is the loan. Your total purchase budget is £270,000 + £30,000 deposit = £300,000. If you make a £300,000 offer, the lender will fund £270,000 (a 90% LTV mortgage) and you'll fund the remaining £30,000 yourself.
If you misread the MIP as "your whole budget" and offered £270,000 on the same property, you'd actually be over-buying relative to the loan: you'd need a £240,000 loan, your £30,000 would still cover the deposit, but you'd have given up £30,000 of buying power that the lender was already willing to provide.
Don't forget the buying costs
The MIP-plus-deposit number is your gross budget. Your net purchase budget is lower because you need to keep cash back for the costs of completing the purchase:
- Stamp Duty — none for most FTBs buying at or below £425,000 in England; surcharges apply on additional properties and on purchases above the threshold.
- Conveyancing — typically £900–£1,800 including disbursements.
- Mortgage product fee — £0–£1,999 depending on the deal.
- Valuation — often free on residential remortgages; £200–£900 on purchases.
- Broker fee — £0–£999 depending on the firm.
- Surveys — £400–£1,500 for HomeBuyer or Building Surveys (optional but recommended).
- Removals and incidentals — £500–£2,000.
For a £300,000 FTB purchase, plan on £3,000–£6,000 of buying costs. That comes out of your deposit pot, not the loan, so the cash you need at the start is your deposit plus these costs.
What lenders check at MIP stage
An MIP is intentionally light-touch. The lender typically verifies:
- Identity (name, date of birth, address).
- Income figure (declared, not yet evidenced).
- Outgoings and existing credit commitments.
- Credit footprint via a soft search.
- Deposit existence — yes/no, plus rough amount and source category.
What lenders don't typically do at MIP stage: pull your full bank statements, verify your payslips line by line, run a property valuation, or do a hard credit search. All of that happens at full application, which is why an MIP can occasionally be reduced or withdrawn when the full case is underwritten.
How deposit size influences the MIP indirectly
While the deposit isn't inside the MIP figure, the size of your deposit can influence the MIP figure the lender is willing to issue. Here's why:
- Cheaper rates at lower LTVs. A 75% LTV mortgage carries a lower rate than a 95% LTV mortgage. Lenders stress-test affordability at the actual rate plus a buffer — so a smaller loan at a cheaper rate passes affordability more easily, sometimes letting the lender offer a higher maximum loan.
- Removing the LTV cap. Some lenders cap the maximum loan size at high LTVs (e.g. £570,000 above 90% LTV). A larger deposit moves you below the cap.
- Income multiple uplifts. A handful of lenders offer 5× to 5.5× income multiples on lower-LTV applications, where 4.5× would apply at higher LTVs.
Common pitfalls
Reading the MIP as the offer price ceiling
Offer up to MIP + deposit, not just MIP. Sellers and agents notice the difference.
Not adding the deposit to your search filters
Property portal filters take the maximum purchase price — that's MIP + deposit, not MIP alone. Filter incorrectly and you'll miss perfectly affordable homes.
Treating the MIP as a guarantee
It isn't. The full application can adjust the figure up or down once income, deposit and property valuation are verified. A drop in income, a new credit commitment or an under-valuation can all change the picture.
Letting the MIP expire
Most are valid 30–90 days. Renewals usually re-run the soft search rather than a full underwrite, but lender criteria can change in the gap.
Pros
- Gives sellers and agents confidence in your offer.
- Sets a realistic working budget without committing to a lender.
- Soft search only — no impact on your credit file at this stage.
- Helps surface affordability issues before you fall in love with a property.
- Quick to obtain — often issued within minutes online.
Cons
- Not a binding offer — the full application can change the figure.
- Easy to misread as the whole purchase budget when it's the loan only.
- Multiple MIPs in quick succession can leave footprints visible to some lenders.
- Doesn't include any property-specific assessment — only your personal numbers.
- Expires — typically 30–90 days.
The simple formula to remember
Maximum offer price = MIP + deposit. Then subtract buying costs to get your true net spending budget on a property. That single equation prevents almost every common MIP-related buying mistake.