Can You Negotiate a Mortgage in Principle?

If your mortgage in principle has come back too low and you're wondering how you can borrow more money, you may be wondering, can you negotiate a mortgage in principle? Perhaps you can put a case together to explain how you can afford to take on a larger debt and buy the house you desperately want.

In this insight, we are going to explain how the Mortgage in Principle is calculated, how you can attempt to borrow more, and whether you can negotiate a mortgage in principle at all.

Key Takeaways

• Your Mortgage in principle is not negotiable; it provides an indication of the maximum loan amount, it has been carefully calculated using an assessment of your affordability.
• The calculation is based on fixed criteria, such as your income. However, in exceptional circumstances, you may appeal to the mortgage underwriters.
• To be eligible for an underwriting decision you will need to be ready to make a full application and have an acceptable repayment vehicle. 
• Alternative options for borrowing more money include, considering other lenders, asking for a payrise at work, or repaying debts you may have.

Can You Negotiate a Mortgage In Principle?

A mortgage in principle is not negotiable. It provides an indication of the maximum loan amount you could borrow. It is determined by using fixed calculations based on your income. In exceptional circumstances, you could appeal to the underwriters to borrow more.

When it comes to obtaining a mortgage in principle, it's important to note that it is not a negotiation process in the traditional sense. A mortgage in principle, also known as a decision in principle, agreement in principle, or a mortgage promise is a preliminary assessment by a lender to determine how much they may be willing to lend you based on initial information provided. It gives you an indication of the maximum loan amount you could potentially borrow.

While the mortgage in principle itself is not subject to negotiation, it provides you with a starting point for your property search and helps you understand the price range within your financial means. It also demonstrates to sellers and estate agents that you are a serious buyer, as you have already undergone an initial assessment with a lender.

It's advisable to work with a mortgage adviser or broker who can guide you through the mortgage process and help you explore different mortgage options. They can provide valuable insights and assist in finding the most suitable mortgage deal based on your individual circumstances and preferences.

How is the Mortgage In Principle Calculated?

The calculation of a mortgage in principle is based on fixed calculations that consider factors such as your income, expenses, and credit history. Lenders typically use affordability assessments and income-to-loan multipliers to determine the maximum loan amount you could borrow. These calculations help lenders estimate the level of risk associated with lending to you.

For example, a 6 times salary multiplier means that the maximum loan amount a lender may consider offering is six times your annual salary. For instance, if your annual salary is £50,000, a 6 times salary multiplier would allow you to potentially borrow up to £300,000 for your mortgage. However, it's important to note that the actual loan amount will depend on other factors such as your creditworthiness, expenses, and the lender's specific criteria.

Obtaining a Larger Mortgage in Principle Calculation

Negotiation doesn't really come into this. If you want to borrow more, you're going to need to provide exceptionally sufficient evidence on why you can afford to do so. Even then, any decision will need to go to an underwriter for an individual assessment. As an example, explaining that you've never missed a rent payment won't get you anywhere.

If you are serious about making an appeal, the circumstances and alternatives that could be considered include:

Using a Repayment Vehicle

When appealing for a larger mortgage in principle, you can consider the use of a repayment vehicle as part of your strategy. A repayment vehicle is a financial plan or investment vehicle that you commit to, alongside your mortgage, to ensure you can repay the loan at the end of the term. This can provide additional assurance to the lender and may increase your chances of securing a larger mortgage. An example of a sufficient repayment vehicle could be a large portfolio of stocks and shares.

Consider Other Lenders

Explore other lenders in the market to find out if they offer more favourable terms or have different criteria for assessing income. Some lenders may consider additional income sources, such as bonuses or freelance earnings, which could potentially increase your borrowing capacity. 

Ask for a Payrise

If you are long overdue for a payrise at work, it's quite a compelling reason to explain that you're trying to buy a house and are unable to do so at the moment. It's genuine and will allow you to borrow more if you earn more. 

Repay any Debts

If you have outstanding debts, these will be taken into account for your affordability assessment. That means, the mortgage in principle decision could be less. By repaying the debts you have, such as loans and outstanding credit card balances, you could potentially borrow more.

Seeking Mortgage Advice

As we have established, negotiating a mortgage in principle is not possible unless you have exceptional circumstances. The best way to approach borrowing more would be to speak with a mortgage adviser who offers whole of market advice. Whole of market advice allows advisers to arrange mortgages on behalf of a panel of lenders. Your adviser will be able to review who can lend the most and provide you with the options around this. It would be a positive outcome to try a mortgage broker if you have only so far dealt with your bank. 

If you're unsure where to get started with arranging a mortgage in principle, complete the Sunny Fact Find for mortgage advice. We will help find the best-suited adviser for your needs based on the answers you provide. Your adviser contacts you to explain how they can help, you decide how to proceed. Hopefully, by following the steps in this insight you are now prepared for the next steps and the answer to the question, can you negotiate a mortgage in principle?