Student Loan V Mortgage Deposit

alibhoy

Hi All

Long time lurker, first time poster!

I'm about to start a post graduate course in teaching and am currently re-evaluating finances. Having recently had a baby and moved in with my wife's family, we are relatively financially secure. We have roughly a 10% cash deposit put away in the bank in order to purchase a home once I finish the course and get a job (fingers crossed on both fronts). As we are not paying rent, my wife's salary means I do not need a student loan.

So, my question is, would I be better taking the maximum loan and putting it in my ISA then using it toward placing a bigger deposit on a home? How much benefit is there in doing this?

Apologies if this is a stupid question and thank you in advance for any support.

Lokolo

I did exactly that, but it depends on which loan the cost would be.

My student loan is ony 1.5% on the Post 1998, Pre 2012 fees so its very cheap.

alibhoy

Lokolo wrote: »

I did exactly that, but it depends on which loan the cost would be.

My student loan is ony 1.5% on the Post 1998, Pre 2012 fees so its very cheap.

Thanks. I'm just getting my head around the loan rates. I would be applying for the loan over the next few weeks, so I guess the rate would be whatever they are currently charging? I have an outstanding small loan from 2002 - 2006 undergraduate course...

alibhoy

Ok think I've cracked it!

Correct me if I'm wrong. As I'm Scottish and studying at a Scottish Uni, the interest rate on a loan taken out this year will only be charged at the rate of inflation. I assume this would always be lower than a mortgage interest rate so I'm better off taking the maximum loan and keeping it in my isa until I need it for the deposit.

Voyager2002

Take the loan!

When it comes to buying a house, a large deposit is the key to getting the best mortgage deals. So an extra ten thousand available could reduce the interest you pay on the entire mortgage.

alibhoy

Thanks for the response. I'm guessing I'll only get between 2-3 k but every little helps I suppose.

Will fill out the paperwork today.

Thanks again.

Lokolo

alibhoy wrote: »

Thanks for the response. I'm guessing I'll only get between 2-3 k but every little helps I suppose.

Will fill out the paperwork today.

Thanks again.

You should also look at grants as you may be entitled to some.

And although the money isn't a lot each year, it will add up and by the time you have finished you should be nearer £12k+ (loan is more towards £3.5k), making a healthy deposit.

alibhoy

Lokolo wrote: »

You should also look at grants as you may be entitled to some.

And although the money isn't a lot each year, it will add up and by the time you have finished you should be nearer £12k+ (loan is more towards £3.5k), making a healthy deposit.

Thanks Lokolo, unfortunately I don't think i'm eligible to any grants as my wife earns 36k and we are not paying for childcare (helpful grandmother).

I'm also only doing a one year post-graduate course so won't amass the year on year figures you mentioned, however 3kish will still come in useful toward mortgage.

Thanks Again.

melancholly

http://www.saas.gov.uk/student_support/special_circumstances/postgrad_pgde.htm

Any chance you're doing a 'priority subject' where your fees might get paid?

The only other factor, which is a bit negative, but worth saying, is that there are an increasing number of unemployed teachers out there (seems to vary regionally so might not even be an issue for you). Using up savings now would remove a buffer just in case the worst happened when you finished and you took a little while to find something.

alibhoy

Hi Melancholly

It is a priority subject so my fees are already being paid. I initially applied for fees only but not have decided to take the loan as well.

The job market is something which I thought long and hard about before committing to the course. The various institutions offering the primary teaching course have hugely reduced their intake the last few years so hopefully it will become slightly less competitive. I may also have a slight advantage being male; all the schools I have thus far experienced have had a large majority of female teachers.

Either way, I won't be buying a house until I have a guarenteed job so the loan can sit in my ISA earning more interest than I am paying. Win - win as far as i can see.

Thanks again for the responses.