Buy-for-university mortgages are a product which will help you get on the property market while you’re still studying.
This is an interest-only mortgage aimed specifically at university students. It allows them up to borrow up to 100% of the property value to purchase a home to live in throughout their studies. They will be permitted to rent out rooms in this property to tenants.
To be approved for this mortgage, the student’s parents must act a guarantor, providing security in the form of cash or equity from the property they own.
After the student graduates, they must either sell the property or switch to a traditional mortgage.
There are plenty of mortgage lenders that will consider granting a mortgage to a student.
However, the decision to approve your mortgage application will be primarily based on your annual income, the size of your deposit and your credit score. Most students are severely lacking in these areas.
Thankfully, some mortgage providers will still consider lending to students if they are able to provide a guarantor.
With a buy-for university mortgage, students will only have to pay the interest on their mortgage during their studies. In many cases, they will be able to fund these payments by letting out the additional bedrooms in the property. Plus, you’ll provide the lender the additional safety net of a guarantor.
That’s why it may be easier to be approved for a buy-for-university mortgage, compared to other more traditional mortgages.
If you don’t have a large deposit or a stable income, you’ll most likely have to use a guarantor to stand any chance of being approved for a mortgage.
In most cases, the guarantor will have to be a legal guardian or a direct family member. On top of that, they’ll need to be a UK resident and a property owner. Some lenders also place maximum age and minimum income limits on guarantors.
If parents opt to buy a property and rent it out to their children, they may be able to secure a better interest rate than those available with buy-for-university mortgages. There will also be no need to sell or remortgage the property after their child graduates.
However, when renting properties out to family members, they’ll have to opt for a regulated buy-to-let mortgage. As the name implies, these loans are regulated by the FCA and tend to require larger deposits than traditional buy-to-let mortgages.
Parents will face a larger stamp duty bill when buying an additional property, compared to what their children would pay (assuming it’s their first property). They may also face extra capital gains tax or inheritance tax bills as a result of buying this property.
Finally, when parents buy the property, it is them (not their child) who will face the obligations of being a landlord.
| Response | % of respondents |
|---|---|
| Yes | 94.03% |
| No | 4.48% |
| Don't know | 1.49% |
We look at the latest first-time buyer statistics to see how difficult it is to get your foot on the property ladder in the UK.
From the average mortgage payment and debt to how many outstanding mortgages there are, we explore the latest mortgage statistics in the UK.
A breakdown of what you might pay monthly over the life of a £450,000 mortgage.
A breakdown of what you might pay monthly over the life of a £400,000 mortgage.
A breakdown of what you might pay monthly over the life of a £100,000 mortgage.
A breakdown of what you might pay monthly over the life of a £250,000 mortgage.
Fix your mortgage for 10 years and shield yourself from future interest rate hikes. Compare now to find the right mortgage for you.
A fixed rate mortgage can offer you stability and peace of mind. Find out if a three year fixed rate mortgage is right for you.
A 5-year fixed rate mortgage will see your repayments remain stable for the 5-year term. Find out more in our in-depth guide.
How do property prices in the UK compare to the rest of the world? We estimated the cost of a city centre 2-bed flat in 106 countries to find out.