'Buy for Uni' Mortgage

geckomike

Hello everyone,

My parents and I are having a serious looking at the 'Buy for Uni' mortgages that are currently offered by the Bath Building Society and the Loughborough Building Society. I was hoping that someone might have previous experience with these mortgages, or similar situations.

Here's the low down:

I will be a PhD student with a stipend of £14777 PA, my parents own a home (mortgage free) and can guarantee the mortgage payments and provide collateral society with their home. I understand that the interest rates of both the Bath and Loughborough Societies are high (around 5%), but yearly payments compared to renting are still much cheaper over a 3 year period (equating for interest, fees, and letting spare rooms out, around £3000 PA) and we would then remortgage at the end of the PhD to a lower interest rate.

We are looking at buying a 3 bedroom house, my partner (also a student) and myself will share one bedroom, and we would rent the other two rooms to postgrads or mature students to pretty much cover the entire monthly mortgage. I've seen a few bad things about being a student landlord, most of them seem to centre around difficulties in dealing with friends trashing things, or having to actually be a landlord instead of a student sometimes. I would like to clarify, I am not a fresher, nor would I be renting to friends (initially, of course).

To me, the benefits of being a home owner (getting on the property ladder, increasing property value, building capital, cheaper monthly payments) seem to overcome the benefits of renting (less fees, less risk), but as we would be taking out a 100% LTV, there are obvious risks - although the city in which I will be moving to is Bath, which will probably always be expensive to rent or buy.

If anyone has any experience of this, it would be amazing to hear. I'm trying to find out if and how this could go horribly wrong (barring the housing market crashing, or other calamities)! Please feel free to ask me any questions or for me to clarify anything I might of missed.

dont_use_vistaprint

I looked at doing this for my daughter in York. I think it makes sense generally to buy rather than rent if your'e in the same city for 3+ years and theres low risk of negative equity or extensive repair costs. The right area Bath should be safe.

I dont like the special "Buy for Uni" products. We never went this route but if we did I would have employed my daughter to give her an income and then loaned her a large deposit and guaranteed the mortgage if needed to get the lowest LTV/APR.

The risks can be mitigated by using an agent for the other rooms , so all the normal processes are followed. You dont need to be be much of landlord with a good agent. You can also do shorter contracts and then AirBnB through the summer to trade higher income with income security if you prefer.

Pixie5740

geckomike wrote: »

Hello everyone,

My parents and I are having a serious looking at the 'Buy for Uni' mortgages that are currently offered by the Bath Building Society and the Loughborough Building Society. I was hoping that someone might have previous experience with these mortgages, or similar situations.

Here's the low down:

I will be a PhD student with a stipend of £14777 PA, my parents own a home (mortgage free) and can guarantee the mortgage payments and provide collateral society with their home. I understand that the interest rates of both the Bath and Loughborough Societies are high (around 5%), but yearly payments compared to renting are still much cheaper over a 3 year period (equating for interest, fees, and letting spare rooms out, around £3000 PA) and we would then remortgage at the end of the PhD to a lower interest rate.

We are looking at buying a 3 bedroom house, my partner (also a student) and myself will share one bedroom, and we would rent the other two rooms to postgrads or mature students to pretty much cover the entire monthly mortgage. I've seen a few bad things about being a student landlord, most of them seem to centre around difficulties in dealing with friends trashing things, or having to actually be a landlord instead of a student sometimes. I would like to clarify, I am not a fresher, nor would I be renting to friends (initially, of course).

To me, the benefits of being a home owner (getting on the property ladder, increasing property value, building capital, cheaper monthly payments) seem to overcome the benefits of renting (less fees, less risk), but as we would be taking out a 100% LTV, there are obvious risks - although the city in which I will be moving to is Bath, which will probably always be expensive to rent or buy.

If anyone has any experience of this, it would be amazing to hear. I'm trying to find out if and how this could go horribly wrong (barring the housing market crashing, or other calamities)! Please feel free to ask me any questions or for me to clarify anything I might of missed.

The BFU mortgage from Bath only allows up to 3 occupants including the mortgager so you'd only be able to let one room if your GF will be living in the property too. The BFU from Loghbourgh will allow up to 4 occupants including the mortgager but says that the rooms being let must be granted Short Assured Tenancies which is odd given that there will be a resident landlord so the other occupants cannot be tenants with AST but excluded occupiers.

How much are you looking to spend on a property? Do you see yourself continuing to live in Bath once your PhD is finished?

Pixie5740

dont_use_vistaprint wrote: »

The risks can be mitigated by using an agent for the other rooms , so all the normal processes are followed. You dont need to be be much of landlord with a good agent. You can also do shorter contracts and then AirBnB through the summer to trade higher income with income security if you prefer.

Why would you need to use an agent when there's a resident landlord? Other than getting a gas safety certificate and the right to rent checks what else does a resident landlord need to do except working out if the lodger seems like someone else they could live with?

Comms69

Pixie5740 wrote: »

The BFU mortgage from Bath only allows up to 3 occupants including the mortgager so you'd only be able to let one room if your GF will be living in the property too. The BFU from Loghbourgh will allow up to 4 occupants including the mortgager but says that the rooms being let must be granted Short Assured Tenancies which is odd given that there will be a resident landlord so the other occupants cannot be tenants with AST but excluded occupiers.

How much are you looking to spend on a property? Do you see yourself continuing to live in Bath once your PhD is finished?

Not familiar with these, are the parents on the mortgage?


Agreed its very strange

DottieDam

If you plan to stay in academia then the chances of you staying in Bath once you finish are really low. And postdoc jobs come up very short notice, I generally got an offer then moved the next month which would be tricky with a house to sell/rent.

Depending on the department you might also be expected to cover your own travel expenses and wait over a month to be repaid. I guess it's subject dependent but I travelled a lot for my PhD and constantly had debt on my credit card because of this. Luckily for us the only place we found to rent where I studied was cheaper than we could afford because we had pets, otherwise I would have really struggled. So you don't want the mortgage to be at the top end of what you can afford is what I am saying.

I also did an internship during my PhD and had to move away for a few months so that was double rent.

While I agree it's good to get in the property ladder, if you do plan to stay in academia, and in the sciences, expect a lot of two year posts in different cities/countries before getting a permanent position. It won't be feasible to buy then so you will be stepping straight back off the ladder which is also worth considering.

geckomike

Pixie5740 wrote: »

The BFU mortgage from Bath only allows up to 3 occupants including the mortgager so you'd only be able to let one room if your GF will be living in the property too. The BFU from Loghbourgh will allow up to 4 occupants including the mortgager but says that the rooms being let must be granted Short Assured Tenancies which is odd given that there will be a resident landlord so the other occupants cannot be tenants with AST but excluded occupiers.

How much are you looking to spend on a property? Do you see yourself continuing to live in Bath once your PhD is finished?

I wasn't sure whether students have to be under Short Assured Tenancies, or whether they were referring to non-student tenants. I think the Bath Society mention that you can have non-students for 6 months under Short Assured Tenancy to cope for the situation of, say, buying in March and needing to wait until the start of the academic year for student lets.

We are looking at spending around £250,000. That would give monthly mortgage repayments of around £1460 per month, let each room out as £500 (x2) which would leave my partner and I to cover the remaining £460 per month. This would be opposed to renting a 1 bed flat, which if we are very lucky, could cost £750-800 per month.

Plus

Pixie5740 wrote: »

Why would you need to use an agent when there's a resident landlord? Other than getting a gas safety certificate and the right to rent checks what else does a resident landlord need to do except working out if the lodger seems like someone else they could live with?

It's maybe worth using one of the tenant check services to check the applicant's credit history, references etc. However IME there's a risk of 'computer says no', which is particularly a problem for overseas students who don't have much/any credit history in the UK. And sometimes the companies running these systems aren't the best at explaining why the computer says no.

There's not much value in a full service agent, because the tenant is supposed to complain about maintenance to the agency, who contact you... when you could just fix it. It's worth having contacts with tradespeople, so if there's a burst pipe while you're on holiday your tenant knows who to call and that you'll pay up to £X without pre-approval from you.

You'll need to use the deposit protection services, but I think a private LL can do that.

It may be that your university has some kind of database of approved landlords, and it might be worth getting on that as a way of generating leads, although TBH you'll probably hear about friends-of-friends wanting housing, etc.

geckomike

DottieDam wrote: »

If you plan to stay in academia then the chances of you staying in Bath once you finish are really low. And postdoc jobs come up very short notice, I generally got an offer then moved the next month which would be tricky with a house to sell/rent.

Depending on the department you might also be expected to cover your own travel expenses and wait over a month to be repaid. I guess it's subject dependent but I travelled a lot for my PhD and constantly had debt on my credit card because of this. Luckily for us the only place we found to rent where I studied was cheaper than we could afford because we had pets, otherwise I would have really struggled. So you don't want the mortgage to be at the top end of what you can afford is what I am saying.

I also did an internship during my PhD and had to move away for a few months so that was double rent.

While I agree it's good to get in the property ladder, if you do plan to stay in academia, and in the sciences, expect a lot of two year posts in different cities/countries before getting a permanent position. It won't be feasible to buy then so you will be stepping straight back off the ladder which is also worth considering.

My PhD is almost entirely lab based, so I won't have to travel at all, with limited exceptions that are covered by the stipend.

I was thinking about the possibility of staying in Bath after, desirable, but low - in this case I would hope to remortgage as a buy to let, and let that mortgage keep ticking over. Thoughts?

Plus

geckomike wrote: »

We are looking at spending around £250,000. That would give monthly mortgage repayments of around £1460 per month, let each room out as £500 (x2) which would leave my partner and I to cover the remaining £460 per month. This would be opposed to renting a 1 bed flat, which if we are very lucky, could cost £750-800 per month.

How much can you handle void periods? For example, someone decides to drop out of their course mid-year. Can you handle the full mortgage?

Apart from the financial question, the AST restrictions are a bit unattractive for a potential tenant. Let's say someone drops out in late October, gives 1 months notice and leaves in late November. That's a really annoying time of year to find a new tenant. If you offer it on the open rental market, you can only offer a one-off 6 month AST, which might be December to May or January to June. They have to do exactly 6 months - the mortgage forces maximum 6 month AST, and you can't have an AST shorter than 6 months. That's pretty unattractive for someone looking for a longer term home, unless you can find someone on a 6 month placement that happens to match the time period.

I don't suppose you can keep people on renewing ASTs - allowing them to stay longer if they sign a new contract every 6 months?

Pixie5740

Comms69 wrote: »

Not familiar with these, are the parents on the mortgage?


Agreed its very strange

https://www.bathbuildingsociety.co.uk/mortgages/mortgage-products-for-individuals/buy-for-uni

https://www.theloughborough.co.uk/mortgages/buy-for-uni

Resident landlord yet the Loughbourough Building Society talks about tenants with AST rather than excluded occupiers.