Another FTB mortgage question

jassco

Hi guys and gals,

I've been looking through the forums especially at the FTB threads, but as helpful as they've been I'm looking for some advice tailored to my own situation.

Myself and my girlfriend are looking to buy our first place together. We're looking at around the £100k mark, with a 10% deposit.

My girlfriend is about to graduate and has a guaranteed job with a salary of £24800.

I'm a postgraduate (PhD) student; just started and receive a tax-free bursary of £12960 a year (equivalent of around £16500). I get this monthly and can prove to banks etc that this is guaranteed until Jan 2012 (as much as any other jobs, i.e. a yearly review).

We've only spoke to one bank at the moment (HSBC as we both have accounts with them). They've offered us a 90% LTV on a 2 year fixed-rate mortgage, 5.49% with £199 handling fee, or a 2 year fixed-rate 4.99% with a £1499 handling fee. For these mortgages we'd need to set up an advanced account (about £15/month). We prefer the 5.49 as we can't get the extra handling fee money together.

They also offered us a tracker mortgage, but we'd prefer the security of knowing our exact outgoings each month. Speaking with them, they will take my earnings into account as a salary. otherwise purely on my girlfriend's salary we could only get an 86.9% LTV. We've also considered the FTBI but don't want a new house / flat

The questions I really have are

1) are these good rates for first-time buyers?

2) have you got any advice at all regarding mortgage shopping for FTBs

3) have you had any experience getting a mortgage while still being officially classed as a student, therefore not on a salary? (I'm worried most places will turn me away as technically it's a bursary, not a wage)

4) we've not spoken to any independent advisors yet; can you recommend anyone in the North East?

5) how do independent advisors earn their money? do you need to pay them anything, or is it commission based on them finding you a good deal?

Thanks for reading the thread and for any replies. If you've got any questions I'll get back to you asap.

J

nervousftb_3

i was in exactly the same situation as you a couple of months ago! i am a phd student with a bursary, and my partner has a 'normal' job with a wage.

there are lenders out there who will take your bursary into account, but they are few and far between. we were turned down flat by quite a few! however, we found that abbey, halifax and c&g all have policies in place that MAY take into account student bursaries (i say this as it depends on the individual circumstances, but they are at least willing to consider it, unlike some lenders). halifax are being particularly strict and they actually turned us down despite us having more than a 10% deposit, but obviously each case is different and they may be worth talking to!

we used a fee-free broker - they get their money from the mortgage company once you get a mortgage approved so you don't have to pay them a penny! using a broker is probably the way to go to save you trawling the high street, but make sure they fully understand your situation regarding the bursary (I would advise meeting face to face so that you can physically show them proof of your bursary, explain it is tax free etc..).

in the end, we did get a mortgage from c&g, but as I said we had more than 10% deposit and very good credit rating, otherwise we wouldn't have been accepted. that is not to say they won't accept you (we were borrowing quite a bit more money), but it might not be straightforward. another thing to bear in mind is that the mortgage companies who will take your bursary into account will only accept 75% of it as your income - i have no idea why they do this, but that is their policy and they are not budging! therefore in your case your bursary is worth £9720 to them.

fortunately your girlfriend's income is relatively high for the mortgage you want (ie. you want to borrow ~£90,000, so multiply this by 3/4 depending on the lender and she alone could potentially borrow around £74,400 to £99,200) so this should be enough for you to get the mortgage you want, it just requires a bit more work than for a non-student! best of luck

cpc34

I am interested in this post and the response above as I am in exactly the same position (trying to get a mortgage on my PhD bursay and my fiancee's proper-job salary) and I have yet to find a lender who will consider my income when working out how much they'll lend. I spoke to one person at NatWest who said they would take it into account, but when I spoke again to a different person at the bank a week later (both over the phone) he said they don't consider bursaries as a form of salary. Argh! I even spoke to L&C (brokers) twice and was told first that no banks consider bursaries then on my second call that some do consider bursaries.

Since there so much confusion even within banks about their policies, I was hoping that you could both elaborate on how you described your PhD situation to the bank and what their response was. Jassco, I would be wary of going too far down the purchasing road until you are absolutely sure that they are going to lend based on your bursary. It's worth double checking anyway.

nervousftb_3

both halifax and c&g understood the word 'bursary' straight away, although they would only count 75% of it! they understood it was tax free etc. other banks and building societies didn't have a clue what i was on about! i have a letter from my uni (basically my offer letter) stating that i will be receiving £x per year until 2012, and that was used as proof of my income. they also looked at copies of my bank statements which obviously show my stipend being paid into my bank (i get paid quarterly, and the payment is clearly shown as coming from my uni).

as i said before abbey, halifax and c&g were the only places we spoke to who were willing to take a look at our case. obviously the larger the deposit you have and the more your partner earns the better! it also helps if you manage your current account well as they will no doubt want to look at your statements and see that you don't live in your overdraft! lending criteria is super strict at the moment anyway but for us students they are really tightening up, so i would recommend checking your credit report and making sure that's as near perfect as possible before starting the process. gather all possible proof of income, bank statements etc beforehand, then take all this info to a broker.

jassco

nervousftb, I think the main difference between our two experiences are that I get my bursary paid monthly; which obviously coincides with mortgage payments. When I spoke to HSBC I just happened to have a pay slip on me, and on showing the advisor it (specialist mortgage advisor, not just someone at the front desk), she went and checked with her manager and confirmed it would be taken into account.

I'll have to have a trip to a mortgage broker at the weekend (you know, with working during the week) and see what they come back with. Perhaps it might be worth keeping this thread for stories about phd students getting mortgages; I'll keep you updated on how the hunting goes

Pdocherty

Hi there, this is my first post so apologies if I do anything wrong!

First of all, thank you for the thread as the information is really useful! I am in a very similar situation to the three of you, (I have a PHD bursary until April 2011 and my partner is a teacher) and just wanted to let you know what stage we are at with each of the banks.

Jassco, HSBC was our first point of call as the rate that you mentioned is the best we've found for a 90% LTV. However, a few days after our initial meeting with them they got back to us and said that they couldn't take my bursary into account and would therefore only lend on my partner's salary.

We then approached Clydesdale Bank which has a rate of 5.99% fixed for 3 years, with an arrangement fee of £599. We met with someone to start the application on Friday, and are waiting to hear their response.

I also wondered if any of you have considered asking a parent or relative to act as a guarantor? I don't know if that option is available to you, but perhaps it would help. I asked both HSBC and Clydesdale and they said that they didn't accept guarantors, the family member in question would actually have to be part of the mortgage application. Of course, this is a big ask, and although my father has offered, I would really prefer not to. Something to bear in mind about this is it would reduce the amount of time you could take the mortgage over, as it depends on the age of the eldest applicant.

Similarly to the three of you, I've had conflicting advice and opinions from banks, other PHD students and so on. I know of two situations where PHD students in my department have got mortgages - one was several years ago so I guess that is an important factor! He told me that there was no way that any bank would accept a bursary alone without a guarantor - his parents guaranteed for him. The other situation was two PHD students buying together, and they went with RBS who said they would accept 3 months payslips as proof of the bursary, but as they had just started their PHDs they ended up getting a parent to guarantee them as well. This was in August last year.

I hope some of this helps - please let us know how you are getting on with the process!

cpc34

A quick update: Natwest, who were doing a very frustrating will-they/won't they about my PhD bursary seem to be offering me a mortgage with my salaried partner. I don't have the offer in my hand, but they've accepted the formal valuation and sent me a notifying text saying the offer's in the post.

In the end they said that bursaries were fine, and so my partner had to send payslips as proof of income, they only asked for bank statements from me. These showed regular income, so it was fine.

I still think the bank's have a somewhat erratic approach to dealing with PhDs, but it seems that it is certainly possible - it's just worth asking a few different people at each institution to check.

Pdocherty

Hi,

I'm the same - received a formal offer of loan from RBS last week. Also Clydesdale Bank and Britannia were happy to accept my income after it went to the underwriters.
Congratulations to you - hope everything works out!