Clear student loan or have a bigger deposit?

at11

Hi,
I have a £10k student loan, and want to buy my first property

I have £25k saved up, but also have a £10k student loan,

from my wages £40 comes out each month for student loan repayments

I intend to buy my first property in a few months and am thinking it might be better if i clear my student loan and only have a £15k deposit,

my rationale is that the £40 monthly payments i would need to declare in applying for a mortgage, will reduce the amount i can borrow

also, by playing around with the online quote generators, by having a £10k bigger deposit doesnt affect how much i can borrow, is that correct?

i am looking at 150 - 175k one bed flats and as the g'ment are offering the 5% deposit, i dont think having £10k more capital will affect my borrowing options/amounts

but having a £40 monthly payment will affect the amount i can borrow

So what are others opinions on this?
Am i right in thinking it would be best to clear my student loan and just have a smaller deposit?

thank you

poet123

Student loans are not factored into mortgage decisions.

Rainbowbrite

From my experience of comparing mortgages (limited mind you) I found that the higher deposit you had the better rates you got. As soon as I went under 10% deposit on the calculators, the interest rates and therefore the monthly payments got much higher.

This was on nationwide though so I'm not sure if that's relevant with the government scheme as I don't know much about it. I'd deffo keep the money in my deposit.

bluesbell

It would be better to keep your deposit, most lenders disregard student loans and don't count them as credit commitments as such. Check with the lenders terms before you apply or speak to your broker.

My lender (first direct) didn't even ask how much I owe on my student loan, but they did take into account the £100 a week or so that I repay each month when working out affordability.

kingstreet

Be careful.

Some lenders do deduct the cost of a student loan. They deduct the highest amount they see on your payslips, so if you get a one-off bonus and you pay more that month, that's what the lender will assume for every month.

In this case £40 a month isn't likely to make a massive difference to borrowing power.

at11

thanks for the replies,
so i guess it would be better to have a bigger deposit and just slowly pay off my student loan,

as im not charged interest on the student loan, just rate of inflation, and i would never get this with a mortgage, it looks like the best option would be to slowly pay off my loan and have a bigger deposit, which would allow me to borrow more and on better terms

does this all sound accurate or does anyone have any reasons why it would be more advised to pay off the £10k student loan but have a smaller deposit?

thank you