In this brief guide, we will discuss the Lloyds mortgage in principle process and what documents you may need when looking to get a Lloyds mortgage in principle.
What is a Lloyds mortgage in principle?
A Lloyds mortgage in principle or Lloyds decision in principle is essentially confirmation from Lloyds that they may be able to lend to you based on the information you have just provided to them. It will also provide the amount that Lloyds may be willing to lend to you.
A Lloyds mortgage in principle is good as it will allow real estate agents and property sellers to take you more seriously as well as give you the certainty that you may be able to get a mortgage in the near future based on your current mortgage affordability.
You should not take this as a guarantee that you will be able to get a mortgage with Lloyds as a mortgage in principle is only an indication that they may be willing to lend to you rather than a mortgage offer.
A Lloyds mortgage in principle will usually take from a few hours to a few days for you to receive once you have applied for one. The good news is that a soft credit check is done and this means you will have no damage to your credit file in the scenario that Lloyds is not able to offer you a Lloyds mortgage in principle and you need to make another mortgage in principle application from a different mortgage lender.
Most mortgage lenders now offer a mortgage in principle check with soft credit checks so you may be able to find other mortgage lenders who can lend to you without damaging your credit score through multiple hard credit checks.
If you are unsure on if you will qualify for a Lloyds mortgage in principle check then you should use the Lloyds mortgage affordability calculator to try and get an indication on if you will meet their lending requirements.
You may also want to speak to a whole of market mortgage broker who may have some experience on if Lloyds may be able to lend to you or offer you a decision in principle.
You will need to make an application to get a mortgage in principle. It is important you give truthful information as if you give inaccurate information and get a Lloyds mortgage in principle there is no guarantee that you will actually get a mortgage offer and it is even more likely if not certain that every fact on your mortgage fact find will be checked for accuracy before Lloyds provides you with a mortgage offer.
So providing false information will almost certainly get you caught and potentially leave you banned from accessing any of the lenders products.
Getting a Lloyds mortgage in principle doesn’t guarantee that you will get a firm mortgage offer.
In some cases Lloyds may reject you when you apply for a firm Lloyds mortgage offer as your circumstances may have changed during this time or maybe the property you end up deciding to buy is beyond the type of property Lloyds may be willing to offer or maybe you want a bigger mortgage and Lloyds simply cannot offer you that loan to value on their mortgage products.
Or quite simply, upon you providing more information on your mortgage affordability(such as your income & credit history) Lloyds realised that you did not meet their mortgage requirements.
There are many other reasons why a Lloyds mortgage in principle could be withdrawn or don’t necessarily serve as a complete guarantee that you will be able to get a Lloyds mortgage.
How long does a Lloyds mortgage in principle last?
A Lloyds Mortgage in principle will usually last for 90 days but you may be able to get an extension to this by requesting one from Lloyds.
You may need an extension to your Lloyds mortgage in principle if you are buying an off-plan new build property which isn’t completed yet.
In these cases, there are usually delays to when the property will finally be available and Lloyds will not want to provide you with a firm mortgage offer when your property isn’t ready to be valued as they simply can’t make a firm and final property valuation if the property isn’t complete.
What documents do you need for a mortgage in principle?
To get a Lloyds mortgage in principle you will need a variety of documents
- Your ID documents (passport or driving license)
- Three years of address history (utility bills)
- Proof of your income and outgoings (Your bank statements)
Most mortgage lenders now have systems for you to simply upload these documents to their mortgage portal but in some cases you may need to show a hard copy to your mortgage advisor or broker.
Applying for a Lloyds mortgage in principle
When you apply for a Lloyds mortgage in principle, Lloyds will look mainly at the three below things.
- Can you afford the mortgage amount you need to buy your house based on your current income and monthly expenditure? This is known as your mortgage affordability.
- Lloyds will also check your credit score to see if your score falls within their lending criteria.
- Lloyds will finally look at their lending criteria to ensure you fit within their lending criteria.
You can apply for your Lloyds mortgage in principle online or over the phone.
To apply for a Lloyds mortgage in principle online will take you about 15 minutes
Use a Government scheme
Another way to improve your mortgage affordability is by using a Government scheme.
Government schemes help you reduce the amount of mortgage deposit you may need to put down, reduce the price of the property or create a structure that increases your mortgage affordability much sooner than it would have been.
Some of these include first-time buyer government schemes whilst others in this list are accessible to you even if you are not a first-time buyer.
Government schemes are not available to you if you are getting a buy to let mortgage.
The Government schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save the maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire– similar to the above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
In this brief guide, we discussed how to get the Lloyds mortgage in principle. If you have any comments or questions please let us know.