Can you get a mortgage as a student?
‘Can a student get a mortgage?’ is a common question posed by first time buyers at university. While it might seem an unlikelihood on the face of it, getting a mortgage as a student is becoming increasingly popular, with those at university keen to find a place on the property ladder sooner rather than later.
In this guide, we’ve outlined all there is to know about student mortgages, including standard requirements, whether student loans are likely to impact the process, and the steps you can take to improve your application.
Explaining mortgages for students
From exploring why they’re so popular to going through the steps involved in making an application and the guarantor criteria, we’ve explained all there is to know about getting a mortgage as a student.
Why are student mortgages popular?
Buying property is widely considered to be a strong investment – and it’s no different for student mortgages. Getting a mortgage as a student means stepping onto the property ladder as quickly as possible, and provides 18-21-year-olds somewhat of a head start as they enter the ‘real world’.
Another benefit to applying for student mortgages is the potential to save money. Rather than renting for the entirety of a three-year course, and lining a student landlord’s pocket, it could be prudent to purchase property for yourself.
Getting a mortgage as a student
Naturally, lending rates vary between different student mortgage providers, so it’s important to hunt around. While it’s true that getting a mortgage as a student comes with a few more hurdles than at other stages in life, it’s far from impossible.
Generally speaking, however, mortgages for students require a deposit of at least 15%. This is perhaps a little steeper than a traditional application, but, naturally, mortgages for students carry a greater risk on account of you not being in full-time employment. Compare the rates offered by the various student mortgage providers, including traditional banks, brokers, and independent advisors, to get the best possible deal.
Similarly, there may be limitations to the type of property you can purchase, when getting a mortgage as a student. For instance, you might be restricted to a 10-mile radius of your university, and lenders might stipulate the size or value of property you can buy.
Do mortgages for students require a guarantor?
Because it’s unlikely that you’ll be in full-time employment, getting a mortgage as a student often requires the backing of a guarantor. A guarantor is somebody who picks up the responsibility of the mortgage if payments are late. However, student mortgage providers usually have strict criteria around who can act as a guarantor. A guarantor must:
- Be a direct family member. Failing this, they should be a legal guardian.
- Have full UK residency.
- Own property of their own, in the UK.
- Not be over the age of 65-80. Maximum age varies between student mortgage providers.
- Be able to prove that they earn a minimum income, to demonstrate that they can take over mortgage payment responsibility, if necessary.
Do student loans affect mortgages?
If you’re looking towards the possibility of buying a house, you’re likely considering ‘do student loans affect mortgages?’.
In short, student loan debt can impact your mortgage application process. However, more realistically, it’s unlikely to have a bearing on your application if your finances are otherwise in order and you can demonstrate proof of income to make mortgage repayments.
How to improve your application when getting a mortgage as a student
When making a mortgage application, it’s important to enter the process with a realistic mind. Not all student mortgage providers will offer you favourable terms, but there are a couple of ways you can drastically improve your chances of a successful application: 1) acquiring a larger deposit and 2) improving your credit score.
Student mortgages often require a bigger deposit
While non-students may be eligible for low deposit mortgages, including the 5% mortgage guarantee that the UK government backed in Spring 2021, getting a mortgage as a student may not be so simple. With this in mind, be prepared to save a greater deposit, to satisfy the requirements of student mortgage providers.
On a positive note, the greater the deposit you can save, the wider the choice of mortgage options you’ll likely have, with lenders typically saving their best rates for those with a sizeable deposit. Additionally, a greater deposit means lower monthly payments, which is always a bonus.
How to improve your credit score before applying for student mortgages
As a student, it’s unlikely that your credit profile has seen much action, given your probable lack of noteworthy financial commitments. In the context of getting a mortgage as a student, however, it’s extremely helpful to have a strong credit score. Some straightforward ways you can give your credit score a boost include:
- Registering on the electoral roll
Whether back home or where you go to university, it’s important to be registered on the electoral roll, if you hope to apply for any form of credit.
- Making sure all bills are paid on time
Missed payments stay on your credit score for six years, which can weaken your chances at a successful mortgage application.
- Apply for a credit card
Applying for, and using, a credit card demonstrates that you are able to manage credit in a trustworthy manner. However, it’s also important to keep your credit utilisation low, to avoid a lender wrongly assuming your spending to be reckless. Typically, it’s advised that you keep your utilisation below 25%.
With so many additional hurdles to contend with, compared to a normal application, hopefully we’ve offered clarity around the process of getting a mortgage as a student. For even more expert property advice, explore the latest from us over on our blog.