If you’re looking to expand your portfolio and finish your course with more than a qualification under your belt, you might be contemplating getting a leg onto the property ladder - and why not? It’s never too early to start thinking about getting a mortgage.
But since you’re unlikely to have a steady source of income during this time, not to mention the hefty debt you’re likely to be racking up in tuition fees, is homeownership really viable for a student?
This guide walks you through lender requirements for student mortgages, and provides answers to the most common questions we receive from prospective student mortgage seekers.
What are student mortgages?
Student mortgages are property loans that are taken out by full- or part-time students while in either higher (college) or further (university) education.
In most cases, student mortgages are just the same as regular mortgages, usually residential, and in most cases use a guarantor to mitigate the risk posed by students.
Is it possible to get a mortgage as a student?
Yes, student mortgages are becoming increasingly popular and the majority of mainstream UK lenders offer mortgages for students aged 18 and above - although there are often stipulations attached.
It’s unlikely as a full- or part-time student that you’re also working a job that provides you with sufficient income to meet affordability requirements, so in most cases lenders will require the additional security of a guarantor to ensure repayments are made on time and in full.
What is a student mortgage guarantor?
A guarantor is typically a parent or other close relative that uses either their savings or property as collateral security against your student mortgage, and signs a formal declaration agreeing to make the payments if you’re unable to do so.
If a situation arises in which both you and your guarantor are unable to pay up, mortgage providers are within their rights to repossess your guarantor’s property in order to make the payments on your behalf.
What are the requirements of a student mortgage guarantor?
Although requirements will vary by lender, guarantors must typically meet the following criteria:
Be a direct family member or legal guardian.
Own a property in the UK.
Be a UK resident with permanent right to residency.
Meet the minimum and maximum age requirements of the selected lender.
To meet requirements, guarantors will also need a good, clean credit history. Young students are likely to have minimal information available on their credit files so it’s difficult for lenders to get an accurate idea of borrowing capability.
How much deposit is needed for a student mortgage?
Even if you have a guarantor, there may be minimum deposit requirements for a student mortgage. This isn’t a bad thing - if you’ve got the cash to hand, a higher deposit instils greater trust in lenders, which can give you access to more competitive rates. You’ll also own more equity from the get-go.
Most mortgage providers request a minimum 10% of the property’s value, but with the help of a broker you may be able to seek out specialist student mortgage lenders offering higher loan-to-value (LTV) mortgages.
If you have a guarantor who is using their savings or home as collateral, you may be able to secure a 100% LTV deal, meaning no deposit is required - but bear in mind that repayments are likely to be much higher.
How does student debt affect getting a mortgage?
Although most students accumulate a significant amount of debt throughout higher education, it doesn’t show up on your credit file and negatively impact your score in the same way a hefty credit card bill or payday loan would - although if you default on payments once you’re in employment there will be repercussions.
That being said, student loans will have an impact on your affordability when you start repaying it, and even before this point the outstanding debt will be taken into consideration.
Provided you can prove that your (and your guarantor’s, if applicable) finances are in shape and mortgage repayments are comfortably affordable alongside any other outgoings in the long-term, there’s no reason you shouldn’t be considered.
If you’re in a position to do so, there are a number of ways to boost your application to put you in better stead with lenders, such as putting down a larger deposit, or paying off other outstanding debts to improve credit strength.
Speak to a broker to secure the best student mortgage deal
Whatever your circumstances, you’re in with the best chance of securing the most competitive student mortgage deal to suit your circumstances when you work with a broker who has access to hundreds of high street banks, building societies and niche lenders.
Our team of expert advisors will take the time to get to know you, understand your situation, and use their extensive market knowledge to match you up with the most suitable lender offering the best rates.
If you have any questions or are keen to get the ball rolling, make an enquiry via our online form and we’ll arrange for a student mortgage specialist to give you a callback.
Student mortgage FAQs
Browse our compilation of the most frequently asked questions we get from prospective student mortgage seekers. Have a query that isn’t listed? Don’t hesitate to get in touch.
Can you use a student loan to apply for a mortgage?
In a word, no. As student loans aren’t taxable, lenders don’t count these funds as income and they cannot be used as the sole source of income for mortgage purposes - but it could be put to use elsewhere.
If you don’t need your student loan for everyday living, there’s no reason you shouldn’t transfer it into a savings account and put it towards a deposit. If you take advantage of the government’s Lifetime Isa scheme, you can also boost these savings by up to 25%.
How does this work? Contribute the maximum £4,000 into a Lifetime Isa each academic year and after three years you’d leave with £12,000 of your own savings plus an extra £3,000 from the government, to be used towards a deposit for a home.
What are the benefits of getting a student mortgage?
Anyone who’s set foot into a student house knows the standards are typically subpar at best.
Despite paying an extortionate amount of rent, student landlords rarely feel the need to apply a fresh lick of paint to the place after the previous tenants have left, and it’s commonplace to live with a broken washing machine and slug infestation.
In a nutshell, student living can be pretty grim, not to mention expensive. So if you’re in a position to buy and have access to a lump sum of cash - perhaps inheritance or savings, it’s worth considering purchasing a place of your own.
Can I get a UK mortgage as an international student?
While it can be more difficult for international students to secure a mortgage for a property in the UK, mortgage providers are still happy to take your credit history and other financial affairs into account regardless of where you were born.
The main difficulties for international students surround stringent guarantor requirements; as covered earlier on, eligible guarantors for UK mortgages must currently reside in this country and have a permanent right to residency.
While this can be problematic, there may be options available. Your best bet is to get in touch for a chat so we can understand your circumstances in more detail and make recommendations.
Can PHD students get a mortgage?
Typically the same student mortgage requirements apply to PHD students as college or undergraduate students.
You (and your guarantor, if applicable) will have to be able to demonstrate your affordability is sufficient to keep up with the repayments, and you meet pass lender credit checks and deposit requirements.
Is a guarantor needed for the whole student mortgage term?
Once you’re in a position in which you can demonstrate you’re in a position that you can afford the repayments on your own, the mortgage can be transferred into the homeowner’s sole name.
Ideally, the mortgage will be 80% LTV or less at this point (the borrower will need to cover the costs of an up-to-date valuation), and you must meet the current lender affordability assessments.
What kind of property can I buy with a student mortgage?
Some mortgage providers have restrictions surrounding the type of property that can be purchased with a student mortgage. There may be a minimum and maximum property value, and some lenders stipulate the property must be within good proximity to your place of study.
If you want more flexibility, a broker can advise how requirements vary by provider and point you in the direction of the suitable lenders for you.
Can I get a student mortgage if I have bad credit history?
While a poor credit score or instances of adverse can work against your mortgage application, it all depends on your circumstances as a whole.
If you’re applying with a guarantor with solid credit this shouldn’t inhibit your chances, and could actually boost your file - but be sure to check the implications for your guarantor, as this may work to their detriment.
That being said, there are a number of niche lenders specialising in bad credit mortgages for all situations, so it’s worth having a chat with a broker to understand what options are available to you.
Can mature students get a mortgage?
Yes, as a mature student you are eligible to apply for a student mortgage, and the majority of lenders will assess your application against similar criteria as they would any other student applicant - although requirements will of course vary depending on who you approach.
Depending on your circumstances you may require a guarantor for added financial security, but as a mature student you may be in a position to apply as a sole applicant.
For example, if you’ve previously been in employment for a number of years and have sufficient savings to put towards a deposit, and are still working a part-time job which can comfortably cover the repayments, this may be acceptable.