Impact of student loan repayments on mortgage affordability

gd55

I have a type 1 student loan with a balance of £3,677 at a current interest rate of 5%.

Based on the average payments via my salary over the past 10 months, this will be paid off around November 2024.

I am aware that in the final year or so you can move to direct payments rather than through your salary to ensure you don't end up overpaying. I would be happy to do this, however my patner and I plan to buy a house in spring 2024 and I am not sure of the potential impact and best plan of attack.

We are both first-time buyers, I have adverse history (IVA and associated defaults drop off my file in September this year) and we expect to have around a 10% deposit. We have credit cards that are always paid in full each month, and no other loans etc or adverse history.

So my question is: If I am making direct repayments at the time of our mortgage application will the lender want to see it paid off in full? This would improve affordability, but I'd have to use savings so would lower the deposit slightly.

Or would it be better to stick with the salary payments while making a mortgage application?

Thank you!

DullGreyGuy

Its an outstanding debt that they need to consider your ability to pay it and the mortgage at the same time irrespective of how you are repaying it. 

Its perfectly possible to get a mortgage whilst you have other debts outstanding it just depends on how much you are stretching your finances. If you've £600,000 borrowing power without debts and are wanting to borrow £400,000 then having £3k of loan is unlikely to be an issue. 

stu2500

I got my mortgage through Natwest in 2017 and they didn't take student loan payments in to consideration during the applicationm. This was done through a broker, which I would recommend doing.

kingstreet

stu2500 said:

I got my mortgage through Natwest in 2017 and they didn't take student loan payments in to consideration during the applicationm. This was done through a broker, which I would recommend doing.

They, along with other lenders, do now.

FashionHeart

kingstreet said:

stu2500 said:

I got my mortgage through Natwest in 2017 and they didn't take student loan payments in to consideration during the applicationm. This was done through a broker, which I would recommend doing.

They, along with other lenders, do now.

This is correct because when I applied for my mortgage through an MB in 2021, they also asked for my Student Loans.