Updated: April 17, 2024
Getting a Mortgage With a Student Loan
Worried about how your student loan might impact your chances of getting a mortgage? Let’s take a look at all your options and help you get on the property ladder.
No impact on your credit score
Not many of us come out of university nowadays without a significant amount of student debt, and you might be wondering how you’ll get a mortgage when you’ve got ten of thousands of pounds outstanding in student loans.
In this article we’ll take you through exactly how student loans can affect mortgage applications, what happens if you have defaults 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 something like a large credit card balance or personal loan then, but that doesn’t mean they aren’t relevant.
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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…
- How much your repayments are every month
- How much loan you have outstanding in total
Monthly repayments
The amount you pay out every month on your student debt is important to lenders as it forms part of their affordability checks. When assessing affordability, lenders will look not just at your regular monthly income, but also at any other borrowing commitments. They will want to be sure that what you have left over after all of your regular spending and finance 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. Many other factors will come into play however, 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 loan 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. Whilst 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 on where you stand overall with your disposable income.
Debt to Income Ratio Calculator
You can use our debt-to-income (DTI) ratio calculator to work out how much of your income is going towards your fixed outgoings, expressed as a percentage. Based on that percentage, this tool will tell you whether mortgage lenders will class your DTI as low, medium or high.
Your Debt to Income Ratio is %
Good news! Most mortgage lenders will class your debt-to-income ratio as low. You’re unlikely to be declined for a mortgage based on your outgoings, but speaking to a mortgage broker before applying is still recommended as they can improve your chances of getting the best deal.
Most mortgage lenders will class your debt-to-income ratio as moderate, which means some of them might view your application with caution. Some lenders are much more strict than others when it comes to affordability and debt, so it’s important for you to find a lender who’s more lenient. You should speak to a mortgage broker before you apply to ensure you’re matched with a lender whose criteria you fit.
Most mortgage lenders will class your debt-to-income ratio as high. But that’s where we can help! With so much of your monthly income going towards debt repayments, you could struggle to get approved for a mortgage without the help of a mortgage broker. We can help you find a lender who’s more lenient on debt and affordability, and could still secure a mortgage approval.
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How a broker can help
If you’re worried about how your student finance might impact your ability to get a mortgage then 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 your 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 has knowledge of the whole of the 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 have an impact on your ability to get a mortgage, but with the help of a broker who specialises 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 reoccur. Your broker can help you find the lenders who will be open to applications with a student loan default.
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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 it comes to 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 0808 189 0463 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.
FAQs
Most experts would tell you it’s probably not worth it, unless it makes a significant difference to how much you can afford to borrow. Making a large overpayment that doesn’t clear the debt in full won’t be useful, as your monthly repayments will be the same and this is the important bit for lenders. Talk to your broker for more advice.
No. Even though you may be planning to use some of your student loan to make your repayments every month, student finance does not count as income when it comes to your mortgage application. Student loans aren’t taxable, and they will need to be repaid at some point, so they’re not classed as income.
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Pete Mugleston
Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
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