If you’re a student, can you get a mortgage? Yes, you can! You may even qualify for a 100% LTV (Loan-to-Value) mortgage deal and avoid having to pay any stamp duty.
To make the deal even sweeter, a lack of income is no longer a limiting factor to get on the property ladder. Here’s what you need to know.
What is a student mortgage?
A student mortgage is simply a loan offered to students to buy a property to live in while they study. In most cases, the mortgage does not exceed £300,000 in value and a term of five years. You should also be at least 18 years of age and in higher education.
What are the requirements of a student mortgage deal?
Mortgage lenders have different criteria, but generally, you can expect the following:
- The property should be near your place of study
- The house should have three to four bedrooms
- You should be earning and, if not, have guarantors
- The property should not be a studio apartment or flat
What are mortgage guarantors?
Simply put, a student mortgage guarantor is a person who has your back in case you are unable to pay your mortgage.
Student mortgage lenders are aware that most students are not employed. That is why there is an option to use guarantors when applying for a student mortgage.
The good news though is that student mortgage lenders do allow you to rent out rooms to other students, which you can use as an income source for the monthly mortgage repayments.
Your guarantor has to prove that they have the minimum sustainable income to cover your mortgage should you fail to pay. Additionally, mortgage lenders may have some requirements for guarantors (these may differ depending on the lender):
- At the time of application, a guarantor should not be over the age of 65-70
- At the end of the mortgage term, the age of the guarantor should not be over 75-80
- The guarantor must be a UK resident and own property in the UK
- The guarantor should be a direct family member or a legal guardian
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Do you need to pay a deposit?
This depends on your situation, the lender and the LTV ratio mortgage deals available.
If you come across a student mortgage with a 100% LTV ratio, it means that you are not required to pay a deposit. Although this might look like a brilliant deal, your guarantors’ property may be used as security for your mortgage – and this can be pretty risky. It also means that interest rates might be higher, and your monthly payments may be on the higher side.
You may also come across a 90% LTV ratio mortgage, which means you need to pay a 10% deposit. In this case, the interest rates and the monthly mortgage repayments will be lower than the 100% LTV ratio deal.
To put it simply, the larger the deposit you put down or the lower the LTV ratio, the lower the interest rate and monthly repayments.
Is a student mortgage right for you?
Most students consider a student mortgage to save money and get on the property ladder early. It might be an excellent deal, especially if you have access to a large sum of cash from an inheritance or savings.
Whether you plan on sticking around or leaving after completing your studies does not affect your decision since you will have made a saving either way.
Like all mortgages, you have to determine whether you can keep up with the monthly mortgage repayments or run the risk of losing your property.
- Compare student mortgage deals offered by different mortgage lenders
- Carry out some research on properties around your place of study
- Crunch the numbers
- Speak to your parents and a mortgage specialist
- Make plans to keep up with the monthly payments
Keep in mind that not all students are the same. Just because a particular student mortgage deal works for your friend doesn’t mean it will work for you.
Also, don’t let the joy of getting on the property ladder lead you into making hasty decisions. Take your time and find the right deal for you.
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