Can a Student Get a Mortgage?

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Student mortgage advice

Why should I get a student mortgage?

How can a student get a mortgage?

How to make yourself reliable

What type of property can I buy with a student mortgage?

What happens if I can't afford my payments?

Student mortgage advice

University… A time in your life where you’ll gain independence, freedom and get the realisation that the experience does cost a lot of money! On top of your course fees and accommodation, you will also spend your money going out and enjoying yourself.

We all miss the days when university was free.

Student accommodation can go one of two ways, you’ll either get a landlord that looks after you and your housemates and gets things sorted out on time, or will get one that never replies to your emails and leaves you with a broken washing machine for 4 weeks. Unfortunately, it’s normally example B that people get stuck with.

So, you are forking out money to pay rent each month and are getting nothing back from it, so where does that leave you? You could accept the fact that you’ll have a 4 week waiting period on everything, or you could become your own landlord. This can be made possible by taking out a student mortgage on your home.

This investment could not only save you money in the short term, but also in the long run.

Why should I get a student mortgage?

A student mortgage will allow you to save money on accommodation costs and help you take your first step on the property ladder. You should imagine a student mortgage as an investment. They can particularly be useful for second/third-year students looking to stay on board for their masters/PhD.

Even if you plan to move back home, or somewhere else after you’ve finished your course, you can always sell the property. These funds could be used to buy another house!

Over your years of living within the property, you most likely will have built up equity within your home. If you want to keep the property, you could even withdraw some of the equity in it and use it for a deposit on another home, a holiday, or even a new car… it’s up to you! Remember, this could benefit you both short-term and long-term.

How can a student get a mortgage?

We can think of many reasons why you should get a student mortgage, however, getting one can be easier said than done.

As a mortgage broker, when we come across a student wanting to get a mortgage, they’ll usually already have some sort of funds in place to cover the deposit. If you don’t have a deposit, it’s unlikely that you’ll be able to progress much further in the process. Even if you try and borrow a loan for your deposit, you’ll have three separate payments to account for: your new loan that covered the deposit, your mortgage, and course costs.

When we refer to ‘funds in place’, we are talking about savings, a lifetime ISA or even gifted deposits. Some applicants could have always had plans in place to take out a student mortgage so that they don’t have to deal with landlords and renting.

To qualify for a student mortgage, you’ll need to have a source of income. Very few lenders will allow you to get a mortgage with a part-time job, however, it’s not impossible. Most lenders will want you to have a full-time job. Borrowers with a stable full-time position will appear much more reliable to a lender.

How to make yourself reliable

Reliability is everything a lender wants. They need to know that if they give you the green light, that you are going to be able to afford your mortgage payments.

There are also other ways to show your reliability as a student looking to take out a mortgage:

Put down a larger deposit – An increase in your deposit total would mean that the total that you have to borrow would decrease, hence, decreasing your monthly mortgage payments.

Utilising a government scheme – If you take advantage of a government ‘Own Your Home’ program, you may be able to buy a share in the home to decrease your mortgage payments with the Shared Ownership scheme. There are lots of different schemes available; you should take a look at the government Own Your Home website to find out more.

Have an agreement in principle ready – An AIP can massively benefit your mortgage application as it proves that a lender has already said that they’re willing to lend to you based on you providing evidence of your income and credit history.

This is just to name a few. For more ways to make yourself appear more reliable and help to get your student mortgage process stated, you should get in touch with our mortgage advisors – they would be more than happy to try and help.

What type of property can I buy with a student mortgage?

Like any other mortgage type, there are some requirements. Some mortgages come with basic requirements, whereas others, such as student mortgages, come with complex terms and conditions, for example:

• The property has to be located within 10-miles of your university.
• You have to take the student mortgage out on a 3 or 4 bedroom house.
  

With this in mind, you will need to rent out the rest of the rooms within the house. Once you start receiving money from your tenants, you’ll be able to cover mortgage costs each month.

What happens if I can’t afford my payments?

When taking out a student mortgage, your lender will be aware of the risks that come with lending to a student. They will almost need a failsafe just in case anything goes wrong.

In a situation where you are unable to pay your mortgage payments, they will go to your guarantor. A guarantor is someone who will step in and be responsible for your mortgage payments for the time being. You will have to declare your guarantor during the application process so that they have their details as early as possible.

There are some rules when it comes to choosing your guarantor:

• They cannot be over the age of 65 at the point of application
• The guarantor must own a property of their own within the United Kingdom
• They must live in the UK
  

Taking precautions is something that lenders will always do when it comes to lending to any mortgage applicant, they always have to view it from the worst possible scenario.

For help progressing your student mortgage application and first time buyer mortgage advice, get in touch with a mortgage broker like us today. We can check whether or not you match the criteria for a student mortgage.

Our team hope to hear from you soon.

Written by
Malcolm Davidson
Managing Director of UK Moneyman Ltd.
MAQ & CeRER Qualified

19th February 2024

About the Author

Malcolm Davidson

Managing Director of UK Moneyman LTD

Malcolm is one of the UK’s most well-known and respected Mortgage Advisors. He is passionate about providing a 5* customer experience and he has also trained and mentored dozens of fellow Advisors in a career that is now in its third decade.

In addition to his day to day duties as Managing Director, Malcolm still gives out mortgage advice and feels lucky that his job is also very much his hobby.

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