The home buying process can take a long time with multiple unexpected delays, so knowing how long your mortgage offer is valid for will be useful in allowing you to make the necessary plans to finalise the purchase of your home.
A mortgage offer is an official confirmation from a lender that they are going to give you a mortgage to finance the purchase of a home. You will only get a mortgage offer as a result of filling out a mortgage application and fulfilling the lender's affordability criteria to prove that you are capable of paying the debt back in full and on time.
A mortgage lender will also need to carry out a valuation on the property you wish to buy, so they can be sure that the money they are lending to you is of equal value to the property's.
An agreement in principle, sometimes known as a 'decision in principle' is a more informal version of a mortgage offer. It is a way for a lender to show what they are 'in principle' or in theory willing to allow you to borrow.
An agreement in principle is useful for showing to a seller when making an offer, as it can help move along the home buying process quicker and show serious intent to buy. Sellers are cautious to get tangled into the nitty gritty of the home buying process if they think the buyer might back out as a result of not being able to get approval on a mortgage.
An agreement in principle does not guarantee you will get approved for a mortgage. You will only get asked for a few basic pieces of information such as your income and how much you want to borrow. You may need to provide a few months' payslips as well. The lender will then run a search on your credit report to check your score and see if there are any issues that would prevent you from being approved for a mortgage.
The actual mortgage application will go into more detail, including proof of all of your debts, and a look at your bank statements to understand more about your financial habits and how they may impact your ability to cover your monthly mortgage repayments.
Once you have passed the agreement in principle stage, you will be given a document stating that you now have an agreement in principle with the lender for the specified sum of money. This will give sellers and estate agents more confidence that you are serious about buying a home, and could help speed up the process for you.
An agreement in principle typically lasts between 60 to 90 days, which might give you enough time to put in an offer for a home and apply for a mortgage. You can re-apply for a mortgage in principle if your current agreement has expired, but be careful not to do it too often as each credit search by a lender will appear on your report — and too many searches could mark your credit score down.
Most mortgage offers last between 3 and 6 months. The expiry date on the offer will vary depending on the lender's rules and whether you are getting a mortgage or a remortgage.
For example, some lenders will begin the validity period from the date you put in an offer on the property, while others will set the timer from the date you put your application in.
Mortgage providers may have different rules on their mortgage offer timelines, so it's worth at the decision in principle stage to find out what those are and how quick you would need to be to finish the home buying process.
If you are buying a new build property off plan, then you may need to ask the lender to extend their offer so that you can time it in line with the completion of the property's construction.
If you think there might be delays in activating the mortgage to complete a purchase, and you want to get a fixed rate deal, then look for the deals that offer a certain number of years, rather than an expiration date. For example, some fixed rate deals might simply say they last for 2 or 5 years, whereas others will have an expiration date roughly 2 or 5 years into the future. If there are delays on the latter deals then you would not get the full fixed rate period.
If all goes according to plan, the best case scenario would usually give you a mortgage in about two weeks, but for many people it can take about a month or even longer. How long it takes to get a mortgage will depend on various factors, such as the lender's affordability criteria and assessment timelines.
Getting an agreement in principle first can also help as the lender will already have some of your information and will be able to process your full application quicker.
But ultimately, you will get a mortgage far quicker if you have all of your information and paperwork ready and up to date.