Student Loans and Mortgages

Does having a student loan affect a mortgage application in the UK? Get the right advice here!

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Home Mortgage Affordability Student Loans And Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: March 11, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

March 11, 2024

It’s no secret that a university education in the UK comes with a hefty price tag, leaving most graduates in considerable debt. Whether you’ve completed your studies, or are still considering your career path, it’s useful to know how your student debt will affect you in the future, especially when it comes to buying a home.

In this article we’ll look at how student loans can impact your mortgage application, and how the right advice can help you to secure the home loan you need, no matter the size of your debt.

Can you get a mortgage with a student loan?

Whilst having a student loan won’t usually prevent you from getting a mortgage, it can have an impact on your application. Since the 2014 MMR (Mortgage Market Review), mortgage lenders have had a responsibility to look at student loans alongside other types of debt when they assess the affordability of an applicant.

That said, student loans are slightly different to other debts, so they won’t have as much of an impact as, credit card debt, for example. In fact, student debt won’t appear on your credit file at all, so it won’t play into the credit search aspect of your mortgage application.

How will it affect the application?

A student loan is one of the lower risk debts from a mortgage lender’s perspective, as it will generally lead to a graduate career, which looks good for your long-term repayment potential. The main element of concern for lenders is how much your student loan repayments are. This is because they will need to deduct any existing financial responsibilities from your income, before calculating the size of loan you can afford.

Some mortgage lenders have a maximum acceptable overall debt level for applicants. If you have very large student debts, and/or considerable other outstanding debts, this could also potentially impact the amount that they are willing to lend you. There are bad credit lenders, however, who specialise in helping applicants in these circumstances.

The amount that student loan repayments will affect your income depends on when you took the loan, and how much you earn. This is because student loans are set up so that you only begin making repayments once you’ve achieved a minimum salary threshold, post-graduation.

The good news is, those who do not yet earn enough to make loan repayments won’t be penalised. As lenders understand that your repayments will only rise as your salary does, they won’t be worried about future repayments affecting your affordability.

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Do you have to declare a student loan on an application?

The simple answer is yes, you do. Withholding information about your finances during a mortgage application constitutes mortgage fraud, which will certainly impact your future ability to get a mortgage. It’s not worth the risk, especially given that obtaining a mortgage with student debt is perfectly achievable in most cases.

Given that student loans are not recorded on your credit file unless you’ve defaulted on a student loan taken out prior to 1998, many people mistakenly believe that mortgage lenders won’t find out about their student debt.

The truth is, no matter how you’re paid, your student loan repayments are recorded. They appear automatically alongside tax and pension outgoings on a PAYE payslip, and you have to declare them as part of your tax return if you’re self-employed. All mortgage lenders will ask for proof of income, and therefore, it’s effectively impossible for them to miss your student loan, even if you don’t inform them directly.

How a broker can help you get a mortgage with student debt

A broker with experience in arranging mortgages for students and/or those with student debts will be able to guide you towards those lenders who are most likely to consider your circumstances.

As well as tailoring advice specifically to suit your needs, the brokers we work with have access to the whole of the mortgage market, which means that they may be able to find you a mortgage, even if you’ve been turned down elsewhere.

They can also sometimes access lenders and rates that are not available to the general public, including mortgage providers who specifically cater for borrowers with high student debts.

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Can you consolidate your student loans onto a mortgage?

It’s possible to consolidate your student loan debt onto a mortgage, but the question has to be posed as to why you would consider this. First of all, student loans are charged at low interest rates, and only repaid when you earn a certain amount. If you haven’t repaid within 30 years (or 40 years if you start studying from 2023 onwards) then it’s completely wiped, no matter how much debt is remaining.

Even if you’re currently making repayments, the impact they will have on your overall affordability is likely to be minimal, and whilst removing the debt entirely will improve your overall affordability, you should consider whether your money could be put to better use clearing more pressing debts, or as a larger deposit.

Larger deposits improve your chances of getting a mortgage overall, but will also reduce the length of your mortgage term, and therefore the amount of interest you’ll pay. A broker with experience in this area will be able to advise you about what’s best for your circumstances, and, of course, find a lender willing to consolidate your debts with your mortgage, if that’s what you choose to do.

Which lenders are happy to accept student loans?

The vast majority of mortgage lenders are happy to accept people with student loans, so long as they have an adequate and reliable income. On the contrary, depending on your area of study, there are certain graduate careers that will improve your mortgageability and in some cases, even increase the amount that you can borrow. Check out our guide to professional mortgages for more information.

You won’t need to provide a larger deposit than any other applicant, and a typical minimum deposit requirement on a residential mortgage is 5%. If you can afford to offer a larger deposit, however, this will usually give you access to more favourable rates of interest.

If you’re still studying, a student mortgage can be more difficult to come by, even if you’re a PHD student with stipend income. It is, however, possible to get a mortgage whilst you’re a student, and there are even lenders willing to provide buy-for-uni mortgages, which can help you to earn a profit whilst studying. In either case, a specialist lender is more likely to be required.

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Alternative finance options

Whether or not you’ve completed your studies, you’ll need an adequate income to be considered for a mortgage. Student finance is not classed as income, and cannot be used as such for mortgage purposes, however, there are some specialist lenders willing to look at stipends on a case-by-case basis.

The chances are, if you’ve recently completed your studies or are working part time whilst you study, your salary and savings may not be substantial enough to get approved for a mortgage that will finance the type of property you want.

There are absolutely mortgage options available to those on a low income, however, and you may still be able to secure enough finance to buy your dream home through one of the following methods:

When you apply for a mortgage with someone else, the lender will use a combination of both incomes as a basis for your loan amount. Generally around 4.5 times the joint income is achievable, though some lenders go higher. You should also bear in mind, however, that both people’s outgoings would also need to be considered. You can find out more in our guide to joint mortgages.

Speak to a broker experienced with student debt

Whether you’re concerned that your student loan will affect your ability to get a suitable mortgage, or you’re looking to buy a property as an existing student, call today on 0808 189 2301 or make an enquiry to be immediately matched with a mortgage broker who specialises in helping people with student debt get onto the property ladder.

All of the brokers we work with offer their initial consultation for free, and there’s no obligation to take things any further, so you have nothing to lose.

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FAQs

It is perfectly achievable to get a buy-for-uni mortgage, although, as a student, you may need a guarantor to secure the level of finance needed, depending on your circumstances.

This is a fairly new concept, akin to a buy-to-let mortgage, but for students. It provides you with the opportunity to buy your own residential home, and rent out spare rooms to cover the cost of your mortgage repayments. You could also potentially turn a profit, however, interest rates tend to be high on this type of mortgage, and there are minimal lenders offering them, so it’s important to seek advice from one of the experienced brokers we work with.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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