Student loan - how does it affect mortgage affordability

sparks11

My student loan is on the old 'Plan one', and I know the rules change all the time. But I imagine from a lender'a perspective they're much the same. As others have said, you declare the amount it says on your payslip, which is a % of how much you earn above a threshold. It is treated like any other debt. I wouldn't worry about bonuses etc.Two of my 3 payslips I provided had non guaranteed awards on them that increased the amount of student loan I paid on those months. But the lender accepted that I typically pay £127 and not £150 something.

Student loan repayments feel more like an a additional tax. You've never had the money as it comes out the same as PAYE and NI, so you don't get a chance to spend it. Given that, it is unlikely that in the future your son will be looking for a house where the extra £xxx per month in student loan would make a huge difference to affordability if that makes sense.

densol_2

Wow ! Some great views here thanks everyone - slightly one less thing to worry about

Voyager2002

densol wrote: »

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 ?

I disagree with your advice... if they take part-time jobs and that means that their studying suffers, their degree grades will be lower than they deserve and that will have a serious impact on their earnings (and hence capacity to get mortgages).

As for how outstanding student debt will affect mortgage offers: no-one knows at this stage! However, virtually everyone in their age group will be in a similar position so they will be just the same as most other first-time buyers, and so if there is an effect on the size of mortgage offered this will feed through to a reduction in prices.

xHannahx

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.

If bonus or overtime is done one month skewing the repayments, at the end of the tax year you can apply for a rebate for any overpaid amount based on your income for the whole tax year.
So 9% of any monthly income over £1750 is deducted. Say for 6 months you earned £2000, and 6 months you earned £1500, you would of paid 9% of £250 x 6 for that year, But as you only earned £21k for the whole year you can then claim back your 9% of £250 x 6.
Very few people seem aware of this.

kingstreet

That makes no difference to the mortgage though, does it?

The higher income/payment that one month has reduced what you can borrow.

amnblog

Voyager2002 wrote: »

I disagree with your advice... if they take part-time jobs and that means that their studying suffers, their degree grades will be lower than they deserve and that will have a serious impact on their earnings (and hence capacity to get mortgages).
.

Perhaps it will just teach them that nothing comes for free and hard work pays off.


Do employers like people with good degrees who don't like work, or proven hard workers with decent qualifications.

silvercar

Do employers like people with good degrees who don't like work, or proven hard workers with decent qualifications.

In today's job market, with so many graduates seeking work, I suspect a paper sift will throw out anyone without a good degree.

amnblog

My clients involved in recruitment tell me that it is often everything outside of qualifications that captures their attention as so many youngsters achieve the examination standards.

Purplesky_2

Having bought a house with a student loan, it would only count to the effect of the reduced income. They don't take the capital into account as a traditional loan. Just so you know

kingstreet

Purplesky wrote: »

Having bought a house with a student loan, it would only count to the effect of the reduced income. They don't take the capital into account as a traditional loan. Just so you know

What is a "traditional loan?"

The capital is never taken into account on any loan, it's only ever been the monthly payments.

Typically ignored if the loan has less than six months left.