Getting a Mortgage With a Student Loan

Not many people graduate from university nowadays without significant student debt, and you might wonder how you’ll get a mortgage when you’ve got tens of thousands of pounds outstanding in student loans.

In this article, we’ll explain exactly how student loans can affect mortgage applications, what happens if you default, and how to give yourself the best possible chance of a successful application.

Does a student loan impact a mortgage application?

Yes, but perhaps not in the way you might expect. Although student loans are technically a debt, they aren’t treated in the same way as other debts when it comes to your credit file, so the amount you owe and repay every month won’t show up on any credit record.

Student loans won’t have the same impact on a mortgage application as a large credit card balance or personal loan, but that doesn’t mean they aren’t relevant.

How it might impact what you can borrow

Although it doesn’t show up on your credit file, lenders will almost certainly ask you about any outstanding student loans and will be particularly interested in two key factors…

1. How much your repayments are every month
2. How much loan do you have outstanding in total

Monthly repayments

Lenders value the amount you pay out every month on your student debt as part of their affordability checks. When assessing affordability, lenders will consider not only your regular monthly income but also any other borrowing commitments.

They will want to be sure that what you have left over after your regular spending and finances is enough to mean you can safely afford your mortgage repayments.

In very simple terms, the more you pay every month on your student loan, the less you may be able to borrow. However, many other factors will come into play, and student loans are a very common form of debt, so lenders will be understanding.

Balance outstanding

As well as how much you pay out on a monthly basis, lenders will be interested in the total amount of student loans you have left to pay. This won’t impact your application as much as your monthly repayment amount, but lenders like to have a full picture of any financial commitments.

Should you declare your student loan?

Yes. Although it doesn’t show on your credit record, your student debt is still an important part of your overall financial situation, and even if you aren’t currently making repayments, it may still impact your application.

With any mortgage application, you have a legal obligation to be honest and transparent from the start. Having a student loan outstanding may affect the amount you can borrow, but it’s far better to have all your cards on the table and present lenders with a clear and realistic picture of your finances.

In any case, there’s a good chance the lender will see your student loan repayments when they assess your wage slips during the application process. Our debt-to-income calculator below will give you an idea of where you stand overall with your disposable income.

How a broker can help

If you’re worried about how your student finance might impact your ability to get a mortgage, your best bet is to get expert advice from a specialist broker. A broker who has experience in this area will be able to assess your situation, looking at your repayments and outstanding loan amount, and help you find the right lenders.

These might not always be the high-street banks, so it pays to have an expert on your team who is knowledgeable about the whole market.

Although you might not realise it, even tiny variations in interest rates can mean paying thousands more on a mortgage over a lifetime, so having a broker who can negotiate on your behalf to get you the best deal is always worth it.

Student loan defaults

As with any debt, having missed repayments may impact your ability to get a mortgage, but with the help of a broker specialising in bad credit, you should be able to find a sympathetic lender. The extent to which your student loan defaults will affect your mortgage will depend on several factors, including the severity of the defaults, how long ago it was, and the context.

Lenders will be more likely to approve a mortgage, for example, if it was a one-off missed payment several years ago, and due to a specific reason that isn’t likely to recur. Your broker can help you find lenders open to applications with a student loan default.

Get matched with a broker specialising in mortgages with student loan debt

Student loans are a significant debt, but they needn’t hold you back when applying for a mortgage. The advisors we work with have access to the whole of the market, including the more specialist lenders, and have a huge amount of experience in securing mortgages for people with student finance.

Call us today on 0330 822 0505 or make an enquiry, and we’ll assess your situation and match you with the broker we think has the most relevant experience and expertise for a free initial consultation. They’ll work with you to get your paperwork in order, handpick the best lenders for you, and help you secure the best possible deal on your mortgage.