Who is eligible for a student mortgage?
Students in full-time higher education, who are aged between 18 and 30 in England or Wales, with at least one year left of their course.
How does a student mortgage work?
With a Buy for Uni mortgage, the student borrower buys accommodation in their own name with a mortgage of up to 100% of the property’s value (or purchase price if lower). They rent spare rooms to friends and use the rental income to help meet the mortgage payments.
The mortgage is supported by the parent(s) who will be joint borrower(s) and, where a deposit of at least 20% of the property value is not available, will provide additional security in the form of cash or a legal charge on property. The parent(s) are not a joint owner of the property, which is in the student’s sole name.
The arrangement has the potential to allow the student to live rent free, saving parents thousands of pounds in the process. It provides certainty of tenure and good quality accommodation. Of course the arrangement does carry some risks which we have set out in Important Information for Borrowers and Buy for Uni FAQs.
What extent of parental support is required?
In all cases we require the mortgage to be in the joint names of the student and the parent(s) which means they are individually and jointly responsible for making the monthly mortgage payments and repaying the mortgage in full.
In terms of additional security there are several options to suit different circumstances:
- If at least a 20% deposit is provided, then no additional security is required.
- If less than 20% or no deposit is available, then the mortgage can be supported by either cash deposited in a Vernon savings account in the name of the parent(s) or a legal charge over the parent’s own house.
- If cash is provided then this needs to be equivalent to the amount of the loan that exceeds 80% of the value/price of the property being purchased.
- If a charge over property is provided then this must be equivalent to the amount of the loan that exceeds 75% of the value/price of the property being purchased.
Here are some examples based on a property value of £200,000:
Scenario 1:
Deposit: £0 - Mortgage amount: £200,000
Additional security required: £40,000 cash deposit or a £50,000 charge over property
Scenario 2:
Deposit: £20,000 - Mortgage amount: £180,000
Additional security required: £20,000 cash deposit or a £30,000 charge over property
Scenario 3:
Deposit: £40,000 - Mortgage amount: £160,000
Additional security required: None
When can the mortgage transfer into the sole name of the homeowner?
We could transfer the mortgage into the homeowner’s sole name at a point where the mortgage is less than 80% of the property value and the borrower can demonstrate that they can afford the mortgage on their own in line with our affordability assessments at that time. An up to date valuation would be required at this time with the cost borne by the borrower.
Restrictions on the property that can be purchased
The property must be in England or Wales. The minimum property value is £125,000 and our maximum loan is £400,000.
The property must be in good proximity to the university (typically 10 miles) with a maximum of 4 bedrooms. We will not lend on flats.
The maximum number of tenants is 3. We will not lend if the use of the property requires a mandatory House in Multiple Occupation (HMO) licence (see Q&As for further details).
Is a student mortgage right for you?
The advice we give to you during the application process is limited to the mortgage. We cannot advise you on the commercial viability of your proposal. We've outlined both the benefits and potential risks through our detailed Q&As and Important Information for Borrowers.
Get in touch
Thinking about a Buy for Uni mortgage? Our friendly mortgage advisors are on hand to answer your questions, talk you through the details, and help you decide if it’s the right option for you and your family.
Pop into a branch or get in touch - we’re here to help every step of the way.
