Also known as a mortgage in principle, an agreement in principle or DIP, a decision in principle shows what a lender could be prepared to lend you for a mortgage. These can come in handy, especially when house hunting, as it gives the buyer a proper idea on the properties within their budget. Occasionally, estate agents can ask for a copy of your decision in principle when you are booking viewings on properties, this can be so they know you are a serious buyer and could afford the property in question.

Decision in Principles are not to be confused with a formal mortgage offer. A formal mortgage offer is issued by the lender once you have found the property that you would like to buy, and a mortgage application has been completed.

A mortgage adviser can secure a Decision in Principle for you and will be able to guide you through the whole house-purchasing process.

The information contained within was correct at the time of publication but is subject to change.

Your home may be repossessed if you do not keep up repayments on your mortgage.