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Student Debt Should Not Hinder Mortgage Chances
Newly graduated students are often concerned that they will struggle to get a mortgage once they start their first graduate job due to the large sums owing to the Student Loans Company. Whilst the debt has to be declared as a financial obligation on any mortgage application, underwriters do not pay great attention to it. The reason for this is the low levels of repayment required by the Student Loans Company. Student loans are not recorded on your credit file, so there is no record of your repayment history, good or bad! This may be a bad thing if you are apply for credit from a high street bank or mortgage company for the first time as they may have no credit information on which to base their decision on. Graduates in certain disciplines, such as medicine and law, have an advantage in that a number of high street mortgage lenders will let them take out a mortgage with a 5% deposit, rather than the 10% deposit the lenders will ask for from other first time buyers. In recent years there has been an increase in the number of student mortgages taken out. Normally they are arranged on the basis that the property purchased will be let out to other students who live with the mortgage holder and the rental income will cover the monthly mortgage payments. The author had a student mortgage while he was at university and the balance he had to pay after the rent was collected was very small. Due to interest rate fluctuations during his studies there were periods where there actually was a small surplus each month. Due to the fact that the interest rates charged on Student Loans are closely linked to the rate of inflations, these loans stay at the same level in "real terms". Having a student loan outstanding is a far cheaper debt than having to take out a personal loan or mortgage from a high street lender, and an awful lot cheaper than borrowing on credit cards. The credit crunch has had an effect on the student mortgage, and graduate mortgage, market with few lenders now vying for this type of business. But do not let all the negative press publicity put you off as there are still plenty of mortgages lenders in the market, with over 8000 different mortgage products available in the UK to all types of buyers or remortgagers. As will all mortgage decisions, it is worth approaching a whole of market mortgage broker who will be able to advise on which mortgages fit your circumstances the best. They will also know which mortgage lenders take a softer line than others regarding student debt. This is helpful if it cuts down on the number of lenders you apply to, as a large number of mortgage credit file searches on record can be off putting or suspicious to some mortgage companies. |
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This intel was contributed by Aaron Hill
Aaron Hill
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May, 2012
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