Does "provisional letter of approval" mean I'll get a mortgage

Hi,

am currently looking for a house and given all the recent press about banks not being willing to lend, was concerned about my prospects for being able to borrow as much as I might like.

However, have sent in my details to my bank, and have a "provisional letter of approval" for an amount which is the max I would be comfortable borrowing in any case.

Is this what people mean by "approval in principle"?

So if I go sale agreed on a property in the next 3 months, I can be confident that the bank will show me the money?

Just wondering if anyone has experience of banks giving such approval and then refusing to hand over the money once a property has been identified?

All info appreciated!

You cannot be 100% certain. The offer is just provisional and is also subject to change before drawdown. Read the terms & conditions of the offer.

Is this a pre-Approval In Principal, or have they just worded the AIP it differently?

One way or another - i.e. pre-approval or AIP - it is no guarantee that the mortgage will be there when it comes to drawing it down. If the original poster is on the edge of being approved then they should proceed with extreme caution. On the other hand if their financial situation means that they can comfortably afford a mortgage of the type/amount/term required then they should be OK. Also - make sure to shop around for the best deal on the mortgage, mortgage protection life assurance, home insurance etc.

Sounds like a sub prime lender pre approval letter to me. Did you have to go with a sub prime lender? If so, did you try to get approval from all of the prime lenders first? Until you get full approval you cannot take this mortgage for granted - especially in todays environment, and even then your mortgage rate won't be guaranteed.

Thanks for responses guys - this is not what I'd call a sub prime lender situation - it's one of the big Irish banks - I'll give them a call and see what the bank says - will let you know what they say...

Why not just read the terms & conditions of whatever offer is on the table first?

in simple terms a 'provisional' letter is exactly that, 'provisional' no concrete terms, no guarantees. so it doesn't mean much at all, other than saying 'based on what we've seen we'd likely agree to lend to you'

re "read the terms and conditions", that is a good point. however terms and conditions sometimes reflect what the company needs to say to cover their ass rather what they are likely to do in an individual situation - was just posting here to try to get a gauge of people's actual experience when dealing with letters like these.

also should say that, being a lazy fool i still haven't talked to the bank and that mortgage guys summary of the situation sounds about right to me

grudgehugger said:

re "read the terms and conditions", that is a good point. however terms and conditions sometimes reflect what the company needs to say to cover their ass rather what they are likely to do in an individual situation

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In general terms when entering into an agreement (which may not be the case here with a provisional offer) the terms & conditions are set out by the service provider for the consumer to see. If the consumer doesn't like them then they can go elsewhere. Your description makes it sound like there might be something devious or underhand going on. Other than in a case of mis-selling this is simply not the case.