How you can get a mortgage with a student loan debt!
Before we start, you need to go and check out a programme that was recently released by Martin Lewis. It’s called ’10 Things Kids Need to Know’. He goes into a mass amount of information relating to student loans, how much there’s been scaremongering, putting you off taking out student debt, and I just recommend that programme. It’s given me the inspiration to do this article today because if you have student debt, you shouldn’t be put off your ability or your chances of getting a mortgage.
Now, first of all, just to cover off a little bit in terms of what Martin Lewis said, and it was a massive education for me because, at the age of 16, I went straight into work. From the point of view of a student loan, the way in which my understanding of it works following that programme is it doesn’t matter what amount of debt you have. It doesn’t matter if you have 50 grand, 100 grand, or even a million pounds worth of student debt against you. The key thing is you have a 25 grand a year threshold that your salary needs to exceed before you start to pay back anything in relation to your student loan.
For example, if you’re earning 20 grand a year, you’re going to pay nothing back in relation to your student loan, but if you go and get a job having got your degrees, having got your debt in place, of £40,000 a year, you’re going to pay nine percent of the difference between 25 grand and 40 grand, which is going to be £15,000. You’re paying back nine percent of 15,000, which equates to £1,350 a year, which is only £112.50 per month.
I can tell you from a mortgage lenders perspective, they’re not looking at the amount of debt that you have. They are looking at the amount that you pay back on a monthly basis because mortgages today are based on affordability, I.e, how much have you got coming in from your income? How much is your living expenditure, including the mortgage payment? And what disposable are you going to have left at the end of each and every single month? 100% go and check out that programme because Martin Lewis goes into superb information relating to student debts, but as it comes to getting your mortgage, we’re going to make some assumptions.
Let’s say there’s two of you and you’re looking for a joint mortgage. You’ve got no dependents, you’ve got no debt, no pension contributions, no car loans, no credit cards, no other loans, nothing at all. You’re clean as a whistle. You’re both earning £40,000 per year, giving you a combined income of £80,000 per year. Now, that would mean that you’re both contributing £112.50 per month for your student loan to repay that debt. The interesting thing is when I went onto mortgage lenders websites and started doing affordability calculators, putting in £80,000 a year with no student debt, and they want you to borrow £360,000 as a mortgage.
As soon as I ticked the box that said you have a student loan, with the majority of them it had no detrimental impact at all to the amount that you can borrow, and you are still able to borrow £360,000. That’s because mortgage lenders aren’t looking at the amount of debt, they’re looking at the contribution that you make on a monthly basis. Now, in some instances, it did have an impact. The worst impact I found from a very small number of lenders that I looked at, was a reduced mortgage amount of £347,000, which is only £12,150 difference. So, it’s only reducing the amount that you can borrow by £12,150.
So, don’t be scared by having a student debt and looking to buy your dream home, being a first home buyer. Just speak to someone who is an expert, have all the information that you need to be able to find a mortgage, to buy your home, and do not worry about student debts. That is where a mortgage advisor can assist you in making sure that you get the right mortgage amount, and that you achieve the targets that Start thinking about it early and start thinking about how you can buy your dream home. If you need assistance with that, I’ve done other videos relating to the deposit that you’re going to need, how much you can borrow if you’re self-employed, what number of years accounts that you’re going to need to get your mortgage, so please go and check those out either on YouTube or over on the Active Mortgage Facebook page. Finally, make sure, if not for yourself but for your children, as I’m a parent, go and watch Martin Lewis’ programme, ’10 Things Kids Need To Know’ because it really is an education.
Thanks very much, and I look forward to seeing you again in the next Article.
Here is what to do next:
If that’s something that you would like us to help you with, then please three options. If you want help immediately and you want to speak to somebody, then call us!
Alternatively, you can download a copy of, the Seven Mistakes that Business Owners and Entrepreneurs Make When Getting Their Mortgage, and that will put you into an email sequence that will keep you updated on how you can prepare.
Or you can go to Amazon and buy a copy of my book, The Self-Employed Mortgage Guide, which talks all around my ethos of getting prepared and making sure that you get all your ducks in a row to remove the stress, save yourself money, and get your mortgage with ease. Thanks very much. I look forward to seeing you again – The Self-Employed Mortgage Guide
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