Students can get mortgages but they’ll usually need a guarantor. A guarantor is someone who legally has to pay your mortgage for you if you can’t.
If you’re a student, you’re probably familiar with high rental costs and grotty accommodation. But it doesn’t have to be this way! What if we told you that you could buy your very own place and deck it out just how you want? Here, we’ll look at everything to do with mortgages for students, and how to get one.
That said, getting a mortgage as a student in the UK can be a little tricky. Not because you’re a student exactly, but because as a student, you’re more likely to:
Be young. This means you might not yet have built up a credit score (a score that shows mortgage lenders how good you are with money, based on whether you’ve paid back loans in the past).
Have no income. If you’re in full-time education, you’re unlikely to have a full-time job. This means that lenders might worry about how you’re going to pay back your mortgage. After all, if they’re going to lend you money, they’ll want to be sure they’re going to get it back!
Have no savings. If you haven’t yet had a full-time job, you may have struggled to save up enough money for a deposit.
Of course, you might well be a student who has a credit score, has a decent income and has saved up enough money for a meaty deposit. If that’s you, congrats! There’s nothing to stop you from going out and applying for a standard mortgage – after all, you’re not so different from a non-student.
On the other hand, if you’re more like the typical student we’ve described, that’s fine as well. There are a number of mortgage providers who offer mortgages designed just for students like you.
What is a student mortgage?
When we talk about a student mortgage, we’re talking about a mortgage for someone who’s in full-time education and aged 18 or over.
But no two lenders or borrowers are the same. So, these deals can look very different. Some lenders offer specific student mortgages, but others may encourage you to take out a less specialised mortgage, such as a ‘guarantor mortgage’ or a ‘family springboard mortgage.’
Some lenders even offer ‘buy-for-uni mortgages,’ where they’ll support you to become a live-in student landlord. We’ll look at this in more detail later.
Find a student mortgage
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Mortgage lenders usually want to know that you’re making enough money to keep up your monthly repayments. That’s not easy if you’re in full-time education!
So, how can you convince lenders that you’ll pay it back? Here are two things you can do to make it more likely that you’ll get accepted for a student mortgage in the UK.
1. Rope in a guarantor
A guarantor is someone who agrees to pay your mortgage for you if you can’t. It’s a great way to persuade a lender to approve you for a mortgage as it means they’re likely to get their money back even if you can’t keep up the mortgage repayments yourself.
BUT asking someone to be your guarantor is a pretty big deal. Usually, they’ll have to use their own home as ‘security.’ This means that if neither of you can keep up the monthly repayments, their property could be seized. Eek!
For that reason, your guarantor will typically be someone who trusts you completely, like a parent, grandparent or legal guardian. Normally, your guarantor will also have to be someone who:
Owns a property in the UK
Is below a certain age (often 65)
Is a UK resident
Most mortgage lenders will do checks on your guarantor to make sure that they have a decent credit score and that they can afford the mortgage repayments (in case you can’t).
2. Put down a large deposit
The relationship between the amount you want to borrow and the amount you’re paying upfront is known as the loan-to-value ratio (or LTV).
For example, if you want to buy a house that’s worth £200,000 and you’ve saved a £20,000 deposit, you’ll need to borrow £180,000. This means an LTV of 90% (because you’re borrowing 90% of the property’s value and paying 10% upfront).
In short, the more you can pay upfront, the more likely you are to get a mortgage. Think about it: putting down a big deposit shows mortgage lenders that you’re a serious buyer. It also means you’re taking on a bigger share of the risk.
That said, there are some building societies and banks that offer students a 100% LTV. Just bear in mind that the interest rates will usually be very high (which means you’ll end up paying more overall). Plus, you’ll generally need a guarantor that lenders are super happy with for one of these because otherwise it’s a big risk for lenders.
At the end of the day, if you put down a deposit, you’ll get access to a much bigger choice of mortgage products and deals – especially if you can put down a large one!
Can I get a buy-for-uni mortgage?
A buy-for-uni mortgage is essentially a buy-to-let mortgage for students. In other words, it allows you to buy a property as a student and then rent out the spare rooms to help cover the cost of your mortgage repayments.
This kind of mortgage can be a great way to get on the property ladder and potentially even make some money while you’re at it. The Guardian recently shone a spotlight on a student who stands to make at least £30,000 this way.
But how achievable is it?
Well, if you have a guarantor, you could borrow up to 100% of the house’s value. So, it’s pretty achievable even for a penniless student (as long as you’re lucky enough to have a guarantor who can afford to put their house on the line for you!).
That said, you’ll still need to tick certain boxes. For example, to qualify for a student buy-to-let mortgage with Loughborough Building Society, you’ll need to:
Have at least one year left on your uni course.
Buy a property that’s no more than 10 miles away from uni.
Have no more than 2 housemates.
Go to uni outside of London.
Buy a property that’s not a studio or ex-council flat.
That doesn’t sound too bad, right? But before you jump in at the deep end, take a second to think it through a little further.
Buying a house is a big responsibility, and being a landlord can be pretty stressful. You’ll need to make sure your housemates pay their rent on time, and there’s quite a bit of admin involved.
Not only that, but buy-for-uni mortgages tend to come with high interest rates – in 2022, they were generally between 4.4% and 4.6%. Take our word for it when we say that’s a lot higher than normal!
Don’t get us wrong, this could be a great opportunity. Just think it through carefully first.
Should I get a student mortgage?
If you’re umming and ah-ing about whether to take the leap and get a student mortgage, we’re here to help. Here are some pros and cons.
Save money: Your monthly mortgage repayments could be lower than the cost of renting.
Get on the property ladder: Getting on the property ladder isn’t easy. This could be a great chance to do it early.
Make money: If your property increases in value, you could make money on it. Similarly, if you choose a buy-for-uni mortgage, you could make money on the rent you charge.
Commitment: What happens if you don’t want to continue living in the property after uni? You could sell it or rent it out, but this needs forward planning.
Responsibility: Owning a property is a big responsibility. For example, you’ll need to deal with repairs and maintenance.
Risk: If you have a guarantor and you don’t make your monthly repayments, they could risk losing their house.
Can you get a mortgage as a PhD student?
If you’re a PhD student, there’s no reason why you couldn’t get a student mortgage in the same way as an undergrad. However, if you’re hoping to use your PhD stipend as a proof of income instead of using a guarantor, you might find it a little tricky.
Why? Well, you’ll only be receiving your stipend for a set period of time. So, you might not have enough money to keep up your monthly repayments once your PhD is finished. Don’t worry, we’re not trying to scare you. It’s just your mortgage lender will want some guarantees they’re going to get their money back (this isn’t too different from getting a mortgage as a fixed-term contractor).
A lender might be more likely to approve you for a mortgage if you’re doing some teaching on the side or some other part-time work. Ultimately, your best bet is getting in touch with a mortgage broker to talk everything through and find out whether there’s a lender who’s likely to offer you a mortgage.
Which are the best student mortgage providers?
Everyone is different. So, without looking through your bank statements and getting on the phone to your mum or dad (assuming they’ve agreed to be a guarantor) it’s impossible to say which student mortgage provider would be best for you.
However, here are a few lenders who are known for offering mortgages for students in the UK in 2022.
Vernon Building Society: The Sun has reported that Vernon Building Society offers the cheapest 100% buy-for-uni mortgages on the market.
Loughborough Building Society: Loughborough Building Society also offers buy-for-uni mortgages, where you should be able to cover your monthly repayments by renting out rooms.
Bath Building Society: Bath Building Society is another of just a few mortgage providers offering buy-for-uni mortgages.
Scottish Building Society: Scottish Building Society offers students guarantor mortgages with an LTV of up to 90%.
Halifax: Halifax offers a Family Boost mortgage which allows first-time buyers to get a 100% mortgage if a family member has cash to act as security. Just watch out because they’ve paused applications during the pandemic.
Don’t forget that there are over 100 mortgage providers in the UK. Much as we’d love to, we can’t list them all! Lots of mainstream providers offer first-time mortgages or guarantor mortgages that are open to students, but it all depends on your individual circumstances.
To find the best mortgage provider for you, make sure you chat to a mortgage broker. A broker will take the time to get to know your needs and will be able to recommend the best lenders and deals for you. They’ll even take care of the whole application process from start to finish (there’s a reason we call them lifesavers!).
How to get a mortgage as a student
As you can see, getting a mortgage as a student is a lot more achievable than you might think. So, what are you waiting for?
If there’s someone in your life who you think might be willing to act as a guarantor, it might just be worth asking the question. Then, if it’s a yes, get a mortgage broker to guide you through the whole process. Our recommendation for a mortgage advisor who specialises in guarantor mortgages is Tembo¹ (get 50% off their standard fee with Nuts About Money).
Tembo are perfect for those trying to get onto the property ladder or increase how much they can borrow. They find the best mortgage for you, and have unique options to increase your borrowing such as an Income Boost¹ and Deposit Boost¹.
They'll handle the whole mortgage for you too, and the service is great.
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