Mortgages based on Stipend income, the most common questions
Your home may be repossessed if you do not keep up repayments on your mortgage.
We specialise in finding the right mortgage for clients in receipt of Stipend income. Typically, these Clients are students completing PHDs that are funded for 3.5 or 4 years.
A lot of people have similar questions so I thought I would tackle the most common of these questions.
‘Can I get a mortgage based on my Stipend income?’
The simple answer here is yes. But it’s certainly more restrictive.
We can help find the best mortgage from around 76 different lenders. When it comes to finding a lender that will accept the stipend income, this list drops to around 12-14 different lenders. These lenders then have differing criteria that mean they may not lend. For example, many of these lenders will consider stipend income but only if there is a second applicant that has more traditional, employed/self-employed income.
As I say, the simple answer is yes we can find you a mortgage based on your stipend income. It’s just from a much smaller market and mostly from lenders you won’t find on the high street.
The stipend is tax free, how do lenders assess how much I can borrow?
Although your income is tax-free, and therefore is the equivalent of a higher annual salary, lenders will look at the annual amount in the same way as someone’s gross income. They will then lend a multiple of this.
As an example, based on the assumptions that you have:
- No debts (credit cards, personal loans, car finance, etc.)
- No dependent children/adults.
- Perfect credit history.
- You can look at a longer term mortgage (20 years +) without going into retirement.
- A large deposit.
- An annual stipend income of £17,668.
You may be able to borrow between £48,100 and £52,200 with most lenders. Potentially up to £79,500 with a few.
There are so many variables, it would always be worth giving us a call to run you through your specific scenario.
How much deposit do I need?
Similarly to any mortgage, you will need a deposit. There are a few ‘0% deposit mortgages’ around at the moment but these lenders won’t accept stipend income. Therefore the minimum you can put down is 5% of the purchase price. However, this would restrict your lender options even further as most won’t consider a mortgage for anyone that has less than a 10% deposit. Therefore, if you want to keep your options as open as possible, the minimum deposit is 10%.
In reality, because your stipend income usually means you only borrow around £50,000-£80,000 and it’s rare to find a property at this level, your deposit may need to be much bigger to bridge the gap between your mortgage amount and the purchase price.
Can I get a mortgage before my Stipend starts?
Again, a really common question is this. Many people find out they have been accepted for a PhD with funding in late Spring/early Summer but won’t start until September/October. They will need to relocate and therefore would like to explore buying a place ready for when they start the PhD.
The answer again is yes. There are some lenders that will consider an application prior to you starting the stipend. They will not however allow you to complete the purchase until you are in receipt of the stipend. They would allow us to apply and process the mortgage up to 3 months before the start of the funding but they won’t allow you to complete the purchase and get the keys until the start date shown on your confirmation letter from the University.
Although there are options, once again this would reduce the potential 12-14 lenders down to 2 or maybe 3 lenders.
Can my parents help me as a Guarantor?
We’ve established that we can get you a mortgage based on your stipend and that we can start the process before the stipend begins. BUT, and it’s a big ‘but’, the amount you can borrow is often much lower than needed to buy a property in the current market. Therefore people often say ‘my parents have offered to be a guarantor for the mortgage, is this possible?’.
Let’s stick with our theme of direct answers followed by a bit of context. The simple answer is, yes they can.
Guarantor mortgages as your parents remember them don’t exist anymore. Instead, there is now something called a ‘Joint Borrower, Sole Proprietor’ Mortgage. This is where your parents will be named on the mortgage and will be just as responsible for it as you are. The difference is, only you are named on the deeds. This is a great way of having a second Applicant’s income taken into account to increase the amount you can borrow.
We wrote a useful blog on this on our website. You can find it here, https://lloydwellsmortgages.co.uk/joint-borrower-sole-proprietor.
Summary
Can you get a mortgage based on your stipend income, absolutely, but it is very tricky and you’ll definitely need some help and guidance to find the best option. We are experts at this type of mortgage and have specialised in it for years now, helping 100s of students get on the property ladder to save them from paying extortionate rent.
If you are thinking about buying as a PhD student and would like some clear, friendly advice, then do give us a call on 01174 520 330. Our initial conversations usually last around 15-20 minutes.
Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.
We will discuss:
- How much you can borrow
- What that will cost
- What fees can you expect
- How Lloyd Wells Mortgages work
- What insurances you will need
- What documentation you will need to provide
- Next steps
The information contained within was correct at the time of publication but is subject to change.
