Change from Employed to Funded Student

Shorthair

Hello, I wonder if anyone can offer some advice...

We are a couple hoping to buy a flat (first time buyers) in the next 6 (ish) months. At present we are both employed, with a combined annual salary of about £52k (we each earn about the same-half of this). We have a deposit of about 15-20%.

We have calculated that this is do-able, in mortgage terms. However, I am considering starting a PhD in, perhaps, 2 years' time. I would only be able to do this if I received funding, which is likely to be around £12k per year.

What we are keen to know is if anyone has had experience of this or is able to offer advice in terms of how this would affect any mortgage. Obviously this will depend on the terms, the other salary in 2 years' time etc., but some general guidance would be helpful. For example - if I saved a lot over the next 2 years and therefore the monthly repayments would not necessarily be affected by my change in status - would the bank be OK with this? Do I have to tell the bank?

Any advice gratefully received, many thanks in advance.

opinions4u

Once you have obtained a mortgage there is no requirement to tell the lender about a change in status.

You are, however, still liable for the mortgage payments, so you should work through the financial impact of the plan very carefully.

I would suggest:

- taking the mortgage out over a longer than usual term (possibly 35 to 40 years).
- saving the difference between the actual monthly payment and what the payment would have been had you taken a 20-25 year term and ringfencing this saving for mortgage purposes only (to see you through the Phd period) ... in addition to any other saving that you were planning to do!
- planning your budget around an interest rate of 8%-10% on the mortgage.

You sound like you are thinking it through carefully. My last point - changes to interest rate - is potentially the biggest threat.

Person_one

I agree with opinions4u. Once you have the mortgage the bank don't care about your circumstances anymore as long as they get their money every month!

I am hoping (fingers crossed!) to go back to full time study in the not too distant future and am also hoping to buy a place asap. Normally, getting a 30-35 year mortgage would be madness but its what I intend to do to ensure I can keep repayments low while studying and then I'll overpay like mad when I'm in employment to get the term down.

This is assuming that your phd will lead to a fairly certain income on completion. Will it?

Cool_man

Thanks for letting me read this great post, keep it up.