Student loan - how does it affect mortgage affordability

densol_2

I wonder if someone could assist. Both my boys are going to University. One this Sep and one Sep 2017. My income is such that we qualify for a bursary and a maintenance grant. They will need loans for the fees.

I'm nagging them to pay off as much as they can off the loan by working part time etc so they don't come out with huge student loans - which can affect mortgage affordability ? How does it affect ? I've searched and can't seem to see?

My oldest is studying Russain and business and its a 4 year course including working and studying abroad for a year - so some big debts could be coming ?

kingstreet

Monthly payments will be factored-in to mortgage affordability and will reduce what they can borrow.

densol_2

kingstreet wrote: »

Monthly payments will be factored-in to mortgage affordability and will reduce what they can borrow.

Cheers for that clear answer - I'm going to show him this. He said it doesn't matter till he earns £21k plus - I said its when he starts to earn that is when he will want to start looking at mortgages !

andyfromotley

Its not quite as bad as it sounds though. If your boys were earning £26k (around about the average salary) they would pay 9% of everything above 21K so 9% of £5000 =£450per year. or less than £40 per month. Thats unlikely to be a deal breaker for a mortgage. They will pay that whether their loan is for £6000 or £80,000. It would perhaps be more accurate to describe it as a graduate tax rather than a student loan imo.

So paying off as much as they can will not impact on the mortgage question unless they can pay of the whole of the debt. They will pay the £450 if they have any student debt.

If you crunch the numbers it tends to make sense to pay off the loans only if you are or are likely to be, a very high earner. A substantial majority of people will not pay back their loans in full and will have them written off. Martin has a very handy guide which you can find on the main site which explains it better than me.

They should of course try to get jobs which will prevent them getting into more general student debt such as overdrafts etc.

Hope this helps.

kingstreet

A lender will take whatever amount is visible on his payslips, so if he isn't paying yet, there will be no deduction.

It can be a problem if you get bonus or overtime one month as the SL payment for that month will be higher and if it's in the payslips for the three months on the approach to a mortgage application, the lender may take the higher SL payment, even though it's a one-off.

squidgyocean

I've known several people get mortgages with large student debt and it hasn't affected any of them, myself included. I wouldn't advise paying it off early as it is a different type of debt to a standard loan and doesn't get added to credit files. The MSE Student Loans guide goes into it a lot more.

p1nky

They don't take it into account like a traditional loan. As others have said and from my own experience they take into account you pay £15 per month and that's that.

kingstreet

p1nky wrote: »

They don't take it into account like a traditional loan. As others have said and from my own experience they take into account you pay £15 per month and that's that.

The monthly payment is used. That's the same as any other loan.

What do you think is different?

VFR-Rider

kingstreet wrote: »

A lender will take whatever amount is visible on his payslips, so if he isn't paying yet, there will be no deduction.

It can be a problem if you get bonus or overtime one month as the SL payment for that month will be higher and if it's in the payslips for the three months on the approach to a mortgage application, the lender may take the higher SL payment, even though it's a one-off.

This is one of the problems I had. I also like to complain about the % payment....I had a 4 year loan so had a reasonable student debt at the end (had to pay fees/ accoms solo). Due to earning quite well, quite early the amount taken each month was high. My debt was cleared within 3-4 years (with no voluntary over payments), At the end it basically felt like I got a 500+ per month pay rise...However until that point I had cash issues as my new job required high expenditure with the salary (had to look the part etc. obviously work funded travel and the like).

amnblog

I would have thought anyone who can achieve a degree in Russian will have the wherewithal to obtain a mortgage.

TravelBugHappy

Yes on the new loan scheme it's unlikely he will ever pay it back - and extremely unlikely to do so before his 1st mortgage application - 9k a year tuition fees alone leave £27K to repay - like oh hers have said payments are rather law - it is best to think of it as a tax rather then s loan