Mortgages For Graduates Explained

There’s a lot of information online aimed at recent graduates who may be looking to get on the property ladder straight out of uni.

Not all advice out there is particularly reliable, and some of it is downright misleading, so we’ve compiled this handy guide to address some of the main questions that tend to come up on this topic, all in one place.

Can a graduate get a mortgage?

The short answer is yes, as long as they can afford the repayments and have enough funds for the deposit requirements. But for most people who’ve recently completed their education, these financial milestones are still some way off.

We know that when people search for ‘graduate mortgages’, they tend to be most interested in finding out which lenders will consider them despite knowing they are likely to score poorly on the criteria that potential borrowers are judged on, such as:

• Not having a large deposit
• Being new in a job and still in a probationary period
• Having large debts in the form of student loans, overdrafts or credit cards
• Poor or no credit history
• Low entry-level income

While all the above will present obstacles to most lenders, some will likely be more lenient than others, especially if you can demonstrate your potential as a reliable borrower. An experienced broker should be able to help you identify the most receptive and generous lenders in cases like yours, boosting your chances of being accepted the first time.

Schemes to consider

Several government-backed schemes have been made available to help people buy property in recent years, and as many of these were designed for first-time buyers, they can also be helpful to recent graduates.

While the Help to Buy scheme has closed to new applicants, options are still worth discussing with a broker. At the time of writing (April 2024), these include:

• Shared Ownership, where you own a ‘share’ of the property and rent the rest.
• The Mortgage Guarantee Scheme helps people with smaller deposits. This is running until mid-2025.
• The First Homes scheme was designed to help key workers such as NHS staff, firefighters, supermarket staff, and others get onto the property ladder.

If none of these are right for you or you don’t qualify, there may still be alternatives to ‘standard’ mortgages that could give you the leg-up you need to make your first property purchase.

Depending on your circumstances and preferences, these could include:

• Guarantor mortgages, where a parent or other close family member or friend formally agrees to ‘bail you out’ if you ever face difficulties repaying your mortgage.
• Joint Borrower Sole Proprietor (JBSP) mortgages, where a close family member or friend agrees to pay a portion of your regular repayments with no rights to the property for an agreed period.
• Family-gifted deposits occur when family members gift you a sum of money with the sole purpose of using it to fund a deposit.

What other options are available?

In summary, your options as a recent graduate without significant family (or, in rare cases, employer) support are likely to be:

• Convince a lender that your credentials, current salary, and savings make you a reliable and trustworthy customer (easier if you have a professional degree).
• Wait until you’ve saved enough deposit and have a high enough regular income that most lenders will consider you. A tax-free savings account, like a Lifetime ISA, could help.
• Take advantage of a scheme like Shared Ownership or First Home, designed to help people get onto the property ladder.

As always, each route has pros and cons, and you must decide which option best aligns with your priorities.

Mortgages for graduates in high-earning professions

You may be eligible for the perks offered by some lenders specialising in professional mortgages: exclusive mortgage deals available to those with particular qualifications. The benefits of these deals usually include:

Not all lenders offering professional mortgages will accept very recent graduates, but you may need a few years of proven service before you’ll be eligible for the best deals. Speak to a specialist broker if you’re interested in finding out what’s available to professional graduates with your experience level.

Can graduates declare stipend income?

Suppose your employer pays you a stipend to support your living costs while you’re undertaking training, such as an internship or apprenticeship. In that case, you may be able to declare this as income for affordability purposes.

Some lenders are willing to factor in stipend income when assessing affordability, so it’s worth asking a specialist broker for advice on which to approach if you want to include this in your application. The main issue you are likely to face is that stipends are generally much lower than average salaries, so lenders will want solid proof that your earnings are set to increase.

How can a broker help graduates get approved

A broker specialising in graduate mortgages should have the most complete picture of the breadth of deals currently offered to graduates of all types. Because they work with customers like you nearly every day, they’ll be ideally placed to spot genuinely attractive options while warning you of any questionable ones and can hand-pick products to suit your needs.

They will also have intimate knowledge of the lender landscape, meaning they’ll only approach providers with a strong track record of catering to graduates in your situation, boosting your chances of success the first time. This is especially important when building up your credit record, as a failed application could seriously impact your chances of being accepted next time.

Make an enquiry, and we’ll match you with a broker specialising in graduate mortgages today.

Which lenders favour graduates?

As there are no ‘graduate’ mortgages per se, it’s hard to predict which lenders will be the most suitable for you without knowing more about your current situation, priorities and plans.

This is because your choice of lender will depend on things like the type of mortgage you want, your job status, and whether you plan to use any of the schemes currently on offer. Each lender will have its own rules about what it can and can’t offer in each case.

For example, if you’re fresh from your studies and raring to go, Nationwide is one of a handful of lenders that will accept applicants who are in the first three months of their first job and, in the right circumstances, will even offer mortgages to people in that role.

If you need financial support and your family can provide a 10% security deposit, you might consider Barclays’ Family Springboard mortgage. A 5-year fix is currently offered at a rate of 6.20% for borrowers who can personally put down a 5% deposit in addition to the 10% family-backed security or 6.25% for those who don’t have any deposit saved at all.

A few other lenders offer family assist mortgages, usually through specialist broker-only agreements.

If you opt for a Guarantor mortgage, you are more likely to find a suitable lender among the smaller building societies than with any high street banks. Still, due to the higher risk to the lender, the loan size will usually be smaller than what you might get on a standard mortgage.

For example, Penrith Building Society can accept guarantors up to a maximum LTV of 80%.

Earl Shilton and Harpenden building societies can accept them because the guarantor could theoretically cover the entire mortgage for the term. In contrast, Vernon will accept guarantors who can cover 70% of the repayments.

If you’re considering buying with Shared Ownership, there is a decent spread of high-street banks and more specialist providers in this market. However, eligibility requirements can vary greatly between lenders, so you will need to scrutinise the small print.

For example, Virgin offers shared ownership mortgages only where the landlord is a registered social housing provider. Loughborough Building Society accepts shared ownership applications up to 90% LTV on houses and 80% on flats.

Get matched with a broker who specialises in graduate mortgages

If this is your first time applying for a mortgage, you will likely have many questions and will want to feel confident that you’re getting a good deal. A broker who specialises in graduate mortgages can provide that reassurance every step of the way and will be able to steer you in the right direction for your needs.

Many of the options in this article fall into the ‘specialist’ category, which makes it even more important to get professional advice, as some of these more ‘niche’ products are not made available to the public directly.

If you’d like to speak to an expert about your mortgage goals after university, call 0330 818 7026 or make an enquiry today, and we’ll put you in touch with a specialist broker.