24th April 2025
Find out more about managing payments on a student mortgage and being prepared to choose tenants and collect rent.
For most students in full-time education, getting a mortgage on a house would be impossible - this is where student-specific mortgages come in. A Buy for Uni mortgage allows a student to buy and live in a property with the help of family and then rent out the spare rooms to help cover the cost of mortgage repayments. This is subject to specific terms and conditions, which you can discover here. In this article we look at keeping up with mortgage repayments on a student mortgage.
Financial responsibility: Owning a home means managing mortgage payments, maintenance, and bills - on top of student expenses. It’s important the student borrower is able to manage their finances.
Deposit and affordability: These types of loans often come with a high loan-to-value (LTV) ratio, meaning buyers can borrow a larger percentage of the property’s value, usually with support from a guarantor, such as a parent. While this can help with affordability, it also increases the risk of negative equity if property prices fall.
Rental risks: Letting out rooms can help offset costs, but issues like unreliable tenants, periods of vacancy, or the need to comply with landlord regulations can create financial and legal challenges.
Maintenance and unexpected costs: Repairs, insurance, and property upkeep add expenses in addition to mortgage repayments.
Tax implications: The rent you receive is classified as income so could potentially be liable for income tax. However, it would need to be more than any tax-free allowance and the additional tax allowance provided under the ‘rent a room’ scheme. We can’t advise you on this, so you would need to check with HMRC.
More information can be found at:
www.gov.uk/income-tax-rates
www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme
If you think that tax is needed to be paid, then it is the responsibility of the student to complete a relevant tax return for HMRC.
Budgeting is critical for ensuring that mortgage repayments are made on time. Creating a realistic budget includes all potential income such as rent from tenants, part-time work and university grants. All expenses like mortgage payments, utilities, council tax, food, maintenance, building/contents insurance and anything else that may need to be funded should be considered. There are many budgeting tools and apps to track income and expenses to help make sure that payments are managed. It is also important to set aside a contingency fund for unexpected costs, such as repairs and vacancies, so that this doesn’t get in the way of mortgage repayments.
It is essential that reliable tenants are selected who are likely to pay rent on time and respect the property. This could possibly include people that the student knows well. If renting to new contacts is a consideration, it might be a good idea to do research or request references to ensure that the potential tenants have good rental history. Interviewing prospective tenants to gauge their reliability and suitability might be a good idea.
Maintaining a positive relationship with tenants can help with receiving timely rent payments and a creating a positive living environment, plus having regular communication to address any concerns or issues before they escalate can ensure that the relationship remains positive. Setting up periodic check-ins or house meetings to ensure that everyone is on the same page could be ideal, as it is beneficial to be approachable and flexible whilst enforcing rules and agreements.
It is essential to have a clear policy in place for late payments, including any penalties or late fees, plus rooms must be let under an Assured Shorthold Tenancy Agreement. Payment issues should be addressed early and seek solutions like payment plans or reminders. If a situation becomes serious, the landlord is within their rights to discuss legal options or mediation services.
It's important to have the right insurance coverage, such as landlord insurance, to protect against potential risks like property damage or loss of rental income. There are many different types of insurance available, and they all cover different things (e.g building insurance, contents insurance and liability insurance). It is also a good idea to research what these types of insurance cover. Regularly reviewing and updating insurance policies to ensure adequate coverage is ideal.
Financial support or assistance from programs that might be available to student mortgage owners, such as extra university grants can be explored. Some are available to students whose parents have a lower income or if they are the first to attend university in their family. Government schemes or grants can be looked into as well. Look into mortgage payment holidays or other refinancing options if payments are struggling to be met. However, it is very important to see professional advice if the situation becomes challenging.
When understanding how to successfully manage the Buy for Uni mortgage, organisation, communication, and financial discipline is vital. It is very important to stay proactive in managing the property and finances to ensure long-term success.
If you’d like to find out more about Buy for Uni, drop in to one of our local branches or contact us for more information. You can also read more about Buy for Uni mortgages here.