Using student loan as deposit for house?

coldstreamalways

OP, go for it. I saved my student loan and worked two jobs through 6 years of Uni . I budgeted £20 a week for groceries and one night out a month, had no mobile phone or computer. I am now in a very fortunate position of having a well paid job and a house that I let as well as mine and DH's dream house. None of that would have been possible if I hadn't saved my loan. Granted I now pay about £400 a month off it but that is money I have never had so I don't miss it. When it is paid off next year, I will put it towards overpaying the mortgage. The interest rate is tiny compared to a mortgage.

Once you have graduated and live in your own home, you will put far more tax into the country than you have taken out and you will have set a fine example to your son.

Rob, I cannot imagine what you spend that amount of money on but I hope that your health problems get sorted by the NHS, something that I take very little out of but contribute a great deal to. I don't have children either but I don't resent the well off for putting their children through state funded education when they could afford to go private.

There is a saying about football "hate the game, not the player" well, maybe you shoud "slate the system, not those who work hard and take advantage of it whilst trying to better themselves".

Lokolo

jockosjungle wrote: »

Actually its not much of an investment idea anymore, the interest is based on inflation so its only good if you can get more in interest than the rate of inflation, this isn't necessarily the case anymore.

Martin (in the article) is not advocating that people take out a student loan and spend it on a house, he is merely stating that you may be able to take out the loan and get more in interest from a bank than it costs you. I don't think anyone is advocating taking out a loan to raise a deposit, although the student loan is different in that it won't show on a credit report and won't be included in your mortgage calculation, it is still a loan that you need to pay back. As I said in my other post, its a loan that racks up over the years and will leave you paying an extra 9% tax above £15k.

Trust me, it might not seem like a lot of money. But when you've got a mortgage, children, a lifestyle,etc. Paying back £100 a month until you retire is money you may need. Especially if you find yourself unable to get a job that lets you get greater earning potential because of your degree

R

Thats very much wrong.

Even though the student loan rate is linked to RPI, it is also linked to the Bank of England base rate.

So even with high inflation rate, the student loan rate will still be low as the Bank of England base rate is low.

Currently the student loan is 1.5% max going from September because of the base rate. Which can easily be beaten.

---

It also makes perfect financial sense to take out the loan. Even if you pay it back as you graduate (so you then don't pay 9% etc), you will still end up with a profit if you had put it in the bank account.

fallen_angel09

Thanks very much for everyones 'constructive' advice, it has helped me greatly.

My plan is to put any student loans and grants into a high interest savings account, open another high interest saving accoutnt to save wages into and see where I am when I graduate, have a reliable wage & job and then go from them :-)

I have had a look on the links provided about bank accounts, its just all so confusing, can anyone recomend one? Do I need to be moving it about each year to make sure I am getting the best deal possible where interest rates are concerned?

meds12_2

robpw2 wrote: »

why shouldnt she the rest of us have to survive in privately rented housing and have all the uncertanties involved
and trust me if i could get a job i would but 1. i have health problems and 2, im struggling to find somewhere that will give me a chance because i have been out of work for 3 years but i keep trying

But if you did manage to find a job whilst you study for, say, £50 per week, would you really, honestly, be knocking that off your next student loan claim? I cannot imagine anyone doing that! Much more sensible, if that money from employment is "spare", to put it towards your post degree costs - I know people who have gone into law, and some pupilages are not paid, and I hear it costs a bomb to sit the Bar exams. Good luck in finding a job, though - I do sympathise with people denied jobs because of ill health.

opinions4u

fallen_angel09 wrote: »

My plan is to put any student loans and grants into a high interest savings account, open another high interest saving accoutnt to save wages into and see where I am when I graduate, have a reliable wage & job and then go from them :-)

That keeps all your options open.

I have had a look on the links provided about bank accounts, its just all so confusing, can anyone recomend one?

Assuming you pay tax, I'd suggest putting the first £5,100 a year in to a cash ISA (Cheltenham & Gloucester paying 2.7% for example) and the rest in to a decent easy access account (such as The AA paying 2.8%). The Index-Linked Savings Certificates mentioned in a previous post are also an option as they will outpace the interest rate being charged on the student loan.

Do I need to be moving it about each year to make sure I am getting the best deal possible where interest rates are concerned?

Absolutely the right thing to do. Leave money where it is and the account provider will gradually reduce the rate (or, in the example of the 2 accounts above, they will do it automatically at the end of 12 months).

Pop over to the Savings part of the forum every few months to check that you are getting the best rates.

I hope everything works out well for you. I'm pretty sure it will, as you have asked the right questions.

robpw2

meds12 wrote: »

But if you did manage to find a job whilst you study for, say, £50 per week, would you really, honestly, be knocking that off your next student loan claim? I cannot imagine anyone doing that! Much more sensible, if that money from employment is "spare", to put it towards your post degree costs - I know people who have gone into law, and some pupilages are not paid, and I hear it costs a bomb to sit the Bar exams. Good luck in finding a job, though - I do sympathise with people denied jobs because of ill health.

I struggle to survive on the money i get considering i have to pay rent buy books get food etc and pay my bills and its not easy i dont have a council house so have to pay 475 a month rent and i just think its slightly unfair to those who are "struggling" and there is many this year then ever to have to struggle whilst she claims that she wants to save this money for a deposit on a house but is living in a council house which are as she has pointed out much cheaper then normal rents . I would love to be able to save money for my future don't get me wrong but i just currently cannot afford to .
I find it very difficult to get a job and more so at the moment due to the climate even mcdonalds sacked me because im a "risk" apparently

perhaps i have been a little harsh on the op , but i still think that council housing should be for emergencies and not a long term plan and if you can afford to save 6k then your not in an emergency.

opinions4u

robpw2 wrote: »

perhaps i have been a little harsh on the op , but i still think that council housing should be for emergencies and not a long term plan and if you can afford to save 6k then your not in an emergency.

So stable families who have lived in the same council house for 30 years should be kicked out then?

I'm sorry, I don't share your view.

As for the OP, circumstances have meant that she qualified for a council house. Her stated ambition in life is to own her own home and the whole purpose of this post is to identify a suitable route to achieving that.

I'd suggest that is a fairly positive step to freeing up a council property for somebody else in the future. Much more productive than a pointless jealousy.

_Andy_

CLAPTON wrote: »

sorry this is nonsense

a person goes to uni and incurs student loans; they then work and save a bit

when they apply for a mortgage they declare their savings and they declare their stundet loans
the mortgage company may or may not take into consideration the student loans and if they do they do it differently

whether they have spent their student loans or saved them is absolutely irrelevant to the mortgage equation.

Good point!

funtimex

Have you thought of buying your flat from the council, so that you are not using "dead money" in rent. Then, once you have graduated, you can sell the flat and use the excess money for a deposit on a house.

minicooper272

I think I follow you... In essence are you just looking to see whether you are best to keep the money in savings or use it and repay later?

If so, then using your Loan as deposit is fairly sensible - they say student loan is the best kind of debt you can get. The interest isn't actually interest - they just charge you inflation (for example, £100 today may only get you £95 worth of stuff next year - SLC just want to make the money back up to £100 if you follow). If you put the money in a good enough savings account, your £100 will turn into £105 which is essentially worth £100 in a years time (it's kinda confusing). If (and only IF) you can afford to keep this money in savings then definitely do it!

I really want to warn you though - your third year will be the hardest year you go through! Put your loan aside while you can but I really stress that you need to cut back on the number of hours you work in third year so you can focus on your degree! You don't want to go through all this just to get a bad grade... You said you have the first £1000 in a 5 year bond - perhaps put this years loan in an easier to access savings account just in case you need it. The interest will be lower but you don't want to hit serious hard times. And always bear in mind, your university or college will have a hardship fund that can help you if you do hit really hard times (and you don't have to tell them about your savings (though you are meant to))