Agreement in Principle

An 'Agreement in Principle' is a document from a bank that states an agreement to lend a client a certain amount of money based on information the bank has received about the client's financial circumstances.

An agreement in principle is an indispensable tool to anyone looking to purchase a property in Spain in a number of ways:

• You will know exactly how much you can afford to spend on a property
• If competing against someone else for a property, the seller will know that you are a serious buyer with the financial backing of a bank

At International Mortgages 4 You we obtain all of our Agreement in Principles directly from Banks in Spain.

Recently it has come to our attention that some companies are offering an 'Agreement in Principle' instantly online, within 24 hours of enquiry etc. Unfortunately, these 'Agreement in Principles' are usually not valid and are not from banks but from the company offering the service.

If you consider that when a bank issues an agreement in principle, they commit themselves to lend money based on criteria being met. Before a bank will do this they will need to check the clients details carefully which usually involves a separate risk department. Obviously this involves a lot of work and no money for the bank. This amounts to excessive levels of work for no money if they produce an agreement in principle for any client that enquires through a website.

The biggest problem in an agreement in principle that has not been checked by a bank is that the client has no come back on the agreement in principle. In fact the agreement in principle is worthless as it shows no official proof that you can afford the mortgage, or from a property sellers perspective that you have any financial backing.

The main points to check that an Agreement in Principal is from a bank:

• An official bank logo
• An official bank stamp
• A signature from an employee (usually manager) of the bank with name and job title

The example shown here is typical of an agreement in principle from a broker rather than a bank.

If you are unsure about an Agreement in Principle that you have received or wish to discuss this topic in more detail with an expert please call us on 0800 298 5136