Should I consider a student mortgage?

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Some mortgage lenders provide mortgages for university students, but, as a February 2017 Guardian article discusses, they are not for everyone.

At graduation time, many students have debts of thousands of pounds, so mortgages for students could lessen this debt burden.

The mortgages for students turn them into landlords. Finance is available for up to 100% of a property purchase, but students are expected to keep up with mortgage payments by letting rooms on the property to other tenants.

There are several conditions attached to the loan, such as:

• The property must be worth no more than £300,000 and must be within 10 miles of where they are studying.
• Students must be over the age of 18 and the lender will require security by members of their immediate family if the mortgage is for more than 80% of the value of the student property. This security is usually in the form of a charge on the relatives’ home. A charge on a £200,000 property could be around £50,000.
• A close relative must guarantee the mortgage repayments. They could take out protection insurance, such as life insurance, to cover the student mortgage if unforeseen events happen.
• Rent levels are expected to just cover or nearly cover the mortgage repayments. Interest rates are higher than many standard mortgages at between 4.54% and 4.74%.
• After a student finishes their course and is in full-time work, they will be expected to convert their student mortgage into a standard mortgage.

Student mortgages are not suitable for all students, but they could certainly help with accommodation costs for students who meet the criteria.

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