Student loans and mortgages??

LilacPixie

Quick question while I am planning our future move. Does having a student loan reduce the amount a mortgage company is prepared to lend you??

THe reason I ask is we have just under 20k of unsecured debt which we are currently plowing every spare penny into to clear and then start to save towards a deposit for a larger home. We havent however included my husbands student loan into account. He has roughly 2.5k outstanding and is slightly about the earnings limit this year so is repaying about £11 per month from his wages. Would this count as a 'debt' when applying for a mortgage.

The interest rate is something silly like 4.8% so if it is counted I think i would personally rather save the money in a high interest account then clear the balance outstanding shortly before apply for a mortgage but if we did that then we would need to save 2.5k more than we needed as a minimum.

We aim to move to a property with no more than 70% Ltv but depending on what happens with prices than may change.

Kavanne

I have student loan and the mortgage company didn't ask about it when we applied, so we didn't mention it!

LillyJ

They didn't take it into account for us either. I have a (big!) student loan but we have no other debt between us and they said they didn't use student loan in assessing us.
I think it is because they take your "take home" income in to account, in which we took the figure off our pay slips which already had tax, pension, student loan, and company insurance schemes etc taken off.

Tiddler_2

Mortgage Lenders will usually base their affordability calculations on GROSS salaries and so you should disclose your student loans to them.

If you are not currently having to pay them then there is not any amount to deduct, but if you are paying them they will have to deduct the monthly payments. Because the payments are quite small in the OP's case then it may not make a significant difference to the mortgage amount available.

If you don't disclose the payments and the lender asks for your payslips then they will see them as a deduction anyway.

LillyJ

It wasn't that we didn't disclose them. I told them about it and they said, "we don't take student loans in to account"
They asked for our "TAKE HOME" salary anyway, per month. We were not keeping anything from them!

Anyway to the comment about the OP's payments being small due to the small loan, it doesn't work like that, you pay a fixed % no matter how big or small the loan is. Therefore if the OP and I were earning the same wage, we would be paying the same amount of loan repayments per month, even though my loan is big and theirs is small.

Kavanne

Yeah and mine was self cert anyway so doesn't really matter!

Tiddler_2

LillyJ,

I never said that the OP had a small loan, I said that because the monthly payments are small i.e £11 p.m then the effect on the amount they could borrow would be quite insignificant. £11 x 12 = £132 x 5 (approx max income multiple) = £660 approx max difference in mortgage available.

Please don't take my post as a criticism of yourself, or an indication of doing something underhand, it wasn't.

We don't know the lenders involved in either your or the OPs mortgage so I was speaking generally, and generally lenders use gross salaries.

LillyJ

It was the Halifax, they seem to only be concerned with take home pay. Which is understandable as it shows what you actually bring home. It didn't matter anyway as we didn't include either of our overtime which totals about an extra 1000 per month between us and we still only took half of what they said they would lend us.
They didn't ask for any proof eg pay slips at all, which I presume was because we were borrowing a small amount compared to what they wanted to lend us and we had a 10% deposit (whereas I think Halifax are giving quite high LTVs to FTBs still?)