Agreement in Principle validity

chris1210

Hi people,

I'll try and make this quick (if i went into detail i'd be here forever).

Basically, we are looking at making an offer on a property prior to it going to auction, as with us being FTB's, an auction seems very risky financially to us as well as the doubt as to whether we would manage to set up a mortgage in time.

Anyway. Yesterday we visited HSBC as they currently have very good rates for the 80% LTV we are looking at (on 120k). We had to cut the meeting with the advisor short quickly as we were due to be viewing a property. She raced through and without us realising, gave us an Agreement in Principle (she ASSURED us this had not performed a credit check, i'm not 100% i believe her however).

So, we now have this AIP from HSBC, despite not being sure if we would use them for our mortgage.

If we were to place an offer on the property, we have an AIP to cover our offer, but does this bind us to use HSBC should the offer be accepted? Could we get our mortgage through another lender if we decided?

We are a little unsure as to whether the EA need to SEE the AIP before viewing us as 'serious' bidders. But to my mind, if that AIP covers us up to £115k, and we only want to bid upto £110k, does that not put us at a disadvantage when bargaining, as the EA knows what we have been offered?

Any help much appreciated, our heads hurt after the past couple of days!

betmunch

You dont need to use HSBC for your mortgage, they have just said they will give you a mortgage if you ask.

You dont need to worry about showing the EA your AIP, if you want to offer them 110K then offer 110K - This is a contentious point!

The EA does not need to see your AIP before viewing the property, unless the vendor has instructed them to do this, which is highly unlikely!

Lastly, you shouldnt be buying at auction with a mortgage unless you have already got the full offer as you would be exchanging contracts without funding in place. If you do decide to buy with just an AIP I wouldnt bother using HSBC for the mortgage, just do a quick search to find all the problems they have been giving people recently

WhiteHorse

An Agreement in Principle is meaningless. You don't have a mortgage, or even the promise of one. It's just talks about talks, that's all.

hshen

WhiteHorse wrote: »

An Agreement in Principle is meaningless. You don't have a mortgage, or even the promise of one. It's just talks about talks, that's all.

Agreed. As I found out recently, it's not worth the paper it's printed on.

Unless you have a full mortgage offer, which can't really happen without a survey. i.e. won't be available to you prior to auctions unless you folk out the survey money before hand on a property that you might not get...

I think auctions are more for cash buyers.

betmunch

Its not meaningless.

While I agree lenders can change their mind at the drop of a hat, an AIP still represents that basic checks have been done and anyone considering buying a property should have one done before they make an offer on the property.

hshen

betmunch wrote: »

Its not meaningless.

While I agree lenders can change their mind at the drop of a hat, an AIP still represents that basic checks have been done and anyone considering buying a property should have one done before they make an offer on the property.

Totally agree. And it does make the vendor/EA view you in a more favourable light.