Fixed 2 year mortgage offer, but planning on going to university

coffee_fix

Hello, me and my fiance are FTBs and would really appreciate some advice!

We've had our offer on a house we've fallen in love with accepted and things are moving along slowly but nicely. Coventry Building Society has given us a great mortgage offer on a fixed rate 2 year mortgage.


We've made an appointment with our mortgage advisor to sign the paperwork next week, but in the meantime, my fiance has decided to apply to study at 2 year diploma at uni. He's hoping to get accepted for the spring term of 2015 and will complete his course in around January 2017.

This will mean that by the time our fixed term mortgage ends (around spring 2016), he will still be a student. In addition, we are getting married this autumn and will shortly be trying for a baby(!). So potentially I could be on maternity leave by the time we need to get a new mortgage in 2016. Yep, this is a very exciting (and scary!) time for us!

This is probably a stupid question, but presumably when we apply for a new mortgage in 2016 (even if it's with the same mortgage provider) we'll have to go through credit checks and submit our payslips etc?


We've got savings, so I know we'll be able to afford it and the good thing about his course is that he'll be eligible for an NHS bursary and won't have to pay tuition fees. But I'm really worried that if we have to show 3 month's worth of payslips in 2016 we will really struggle to get an offer as it won't look like there's a lot of cash flow coming in if I'm (possibly) on maternity leave and he's a student on a bursary .

Do you think it is worth us applying for a 5 year fixed term mortgage instead? Although this will obviously add to the delay in us getting the house. Plus we've already paid the mortgage application fee and I guess we'd have to pay for that again.


Thanks, everyone!

ethank

An NHS Busary is generally not classed as being suitable income for a mortgage. So you could end up in a place where you could not remortgage in 2 years. As interest rates head up, how would you cope with this?

How much do you have saved?

How will you intend to pay the mortgage whilst a student and having a baby?

coffee_fix

We currently have around £12,000 in savings and are adding to this as we know things will be tight over the next couple of years.


Neither of us have any debts / loans to pay back. The course my fianc! is planning on doing is in a field that is in high demand in the NHS / by agencies - the uni he wants to apply to says 100% of their graduates find work after the course (which is backed up by people we've spoken to who are working in this area), so we're quite confident he will find employment when he finishes.


On my current salary, we could easily make the mortgage repayments while my fianc! is a student. I'm just worried that it's possible I could be on maternity leave when the fixed term mortgage ends around May 2016. But then, I might not be... it's only a possibility!


Do you think it's worth getting a 5 year fixed term mortgage instead? And like I said, it's probably a stupid question, but if we stay with the same mortgage provider when the fixed term mortgage ends, will they still ask for the last 3 months of payslips etc?

amnblog

The lender (and the broker) will ask you if you are aware of any changes to your financial position in the future. (The regulator insists on this).

Clearly, you do have and these need to be taken into account or neither the broker nor the lender are doing their job correctly under the law.

coffee_fix

When we applied for a mortgage (it was about a month ago), we were probably asked this question (I honestly don't remember). However, my fiance only started looking into applying to this course last week (he hasn't applied yet, but is seriously considering it).


Does this mean we need to declare this now? There is a possibility he won't get accepted on the course anyway as it is highly competitive, but we won't find out until August whether he does or not.

amnblog

Read your mortgage documents and you will see you have been asked to disclose any changes in your circumstances.

coffee_fix

OK, thanks. It is possible that he won't get accepted on the course - personally, I would only view it as a change in circumstance if it was a sure thing. Does this mean a lender considers it to be a change in circumstance even if you aren't successful in applying to become a student?


And will this mean we will have to go through the whole application process again?

amnblog

You are looking to purchase a property against a background where the intention is that you will both have lower income in the next 5 years.

If the broker and lender are made aware of this they can advise you correctly. If not, and you struggle to maintain the mortgage later you have caused your own problem.

I suspect the knub of your question is 'will the mortgage be declined if we tell the lender our income may drop' - there is of course a risk of this, but that is no bad thing if your plan would not work financially.

The regulator has tried to bring in new rules under MMR to ensure that borrowers can afford their mortgage not just today but in future years. This is fine in principle, the problem is that borrowers generally want the property today and will let the future take care of itself. The system relies on full disclosure from the borrower which is unlikely if there is a fear that it gets in the way of obtaining the lending.

ethank

£12k is very little for a house purchase, deposit fees, and to cover your loss of income. I would wait until you have achieved the things you want and buy later.

Alphamare

Another option is to have your baby when you are more financially secure. Sure buy your house. I would fix for longer personally. Have your baby after your partner is finished his course and gainfully employed. Why risk your financial future over waiting maybe another year or two to have a baby!

coffee_fix

ethank wrote: »

£12k is very little for a house purchase, deposit fees, and to cover your loss of income. I would wait until you have achieved the things you want and buy later.

What I meant was we have £12k in addition to the deposit and legal fees etc. We have £42k saved in total, approximately £30k of that will go toward the deposit and legal fees and the remainder we will keep aside to see us through when / if my partner goes to uni. I know it's not much, but we are planning to add to that. I know it will be tight, but we've done the figures and I think it will be do-able