Student Mortgages - Guide

With students being required to take on more debt than ever before, it may seem foolish to think about taking another huge debt at such an early age. However, there are several reasons for students to consider a mortgage and buy a house in their university town.

1. Possibility of Capital Growth. Over the past 10 years house prices in the UK have more than doubled. University towns have often seen some of the most significant increases. However, the housing boom may not last for ever, the past is not necessarily a prediction of the future. – In the US, house prices are already falling.
2. Save on Renting. Renting in university towns is often quite expensive. Although a mortgage is likely to be more expensive than the cost of renting, if you bought a 4 or 5 bedroom house, you could let out the rooms and make a significant income from sub letting. This could well cover the cost of your monthly mortgage payments
3. Saves Hassle. Owning a property removes the hassle of dealing with Landlords and finding a new place each year.
4. Forecast for Interest Rates Prospect of lower house prices could lead to lower interest rates. Even if house prices were to fall, this is not necessarily a reason to stop buying a house. A fall in house prices, would probably help reduce inflation and enable the Central banks to reduce interest rates. This is the most important thing for determining the desirability of taking out a mortgage.

How to Get a Student Mortgage

Working part time in Tesco’s for £5.50 is hardly going to qualify you for a £200,000 mortgage. However, there are mortgage lenders who are willing to offer a mortgage to students.

The main way is for parent’s to act as a guarantor. This means that your parents are responsible for meeting your mortgage payments should you default. Quite often their house will be used as equity, in order to lend it out.

Therefore, the decision to get a student loan, may well depend on the willingness of your parents. However, they may see it as a good investment, rather like the buy to let.

For people considering getting a student mortgage in 2007-08 a key question is the extent to which house prices are likely to rise and fall. Predictions of future house prices vary tremendously. However, the fall out from the sub prime mortgage crisis has made many speculators and banks more wary about taking new mortgage products out.

• Guide to Mortgages for first time buyers
  
• Mortgages with help of Parents

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