Graduate Mortgages

Fresh out of university and saddled with student debt might not feel like the ideal time to be thinking about getting on the property ladder, but being a new graduate needn’t stop you securing a mortgage.

In this article we’ll look at some of the different mortgage options for graduates, how student loans might impact your ability to get finance and why a specialist broker is a must.

Are there specific mortgages for graduates?

No, not specifically. While some banks and building societies might advertise some of their mortgages as being aimed at graduates, you’ll tend to find these are just standard mortgage products packaged up to make them more attractive.

Essentially getting a mortgage as a graduate just means finding a product that addresses the key issues facing most newly qualified young people:

• Minimal savings/small deposit
• A poor or limited credit history
• Entry level income
• Outstanding student loans or other student debt

Types of mortgage suitable for graduates

There are several different mortgage products that may be especially well suited to new graduates because they have low deposit requirements or the option to bring in security from family members.

These more niche mortgages do come with higher risk attached for lenders and so you should expect to pay less competitive interest rates, at least initially. A specialist broker can help you find the best deal and avoid you paying over the odds.

Gifted deposit

One of the simplest ways to get a mortgage as a graduate is to have a deposit gifted from a family member, usually a parent. The larger the deposit you’re able to put down, the better interest rates you should be able to get and the higher your chances of having your mortgage application accepted.

The deposit needs to be a gift rather than a loan, otherwise repayments will be taken into consideration as part of your regular outgoings and it may reduce the amount you’re able to borrow.

Almost all lenders are happy to accept a family gift as a deposit and you’d then qualify for a standard mortgage and competitive rates.

Family assisted mortgage

If your family isn’t able to give you a deposit outright but still wants to help in some way then a family assisted mortgage could be an option. With these types of mortgage a family member pays an amount as security – normally a minimum of 10% – into a holding account for a set period – often five years.

You borrow 100% of the value of the property and, as long as you make repayments on time, the family member gets their deposit back at the end of the period, plus interest.

Guarantor mortgages

Another option for your family to help you get on the property ladder is a guarantor mortgage.

These require a third party, often a parent, to take on some of the risk by legally ‘guaranteeing’ your mortgage and agreeing to make payments on your behalf should the worst happen and you’re unable to do so yourself.

Shared ownership

The shared ownership scheme in England allows first time buyers who couldn’t otherwise afford to buy a home to buy just a share in a property and pay rent on the rest.

Shared ownership means a lower deposit and you have the option to grow your share of the property over time as your career progresses and your income grows.

Professional mortgage

The term professional mortgage is a catch all, used to describe mortgages with preferential rates and terms for specific professions including medical jobs, key workers such as teachers, and other ‘safe’ careers such as solicitors and accountants.

If your graduate job is in one of these fields, you may be able to get better interest rates, higher LTVs or potentially borrow based on a higher income multiple, as lenders will take into account future income rises.

Individual lenders will have their own flexible terms for different professional groups, so you’ll need to work with a specialist broker to identify the best deals.

How a broker can help

Having a lower than average income and deposit can definitely put you at a disadvantage when it comes to finding the most competitive mortgage deals. Many graduates assume they’ll find the best deal by going to their existing bank because they know them already, but you can often end up paying a lot more than you need to this way.

If you want to keep monthly mortgage payments as low as possible, your best option is to go via a broker who specialises in finding mortgages for graduates. They’ll be able to research the whole of the market and guide you to the lenders offering the best deals for your circumstances.

The brokers we work with have expertise in the full range of products we’ve discussed, so can help you decide what’s right for you.

If you get in touch we can arrange for an advisor to contact you straight away.

Which lenders offer mortgages to graduates?

Because there aren’t specifically ‘graduate mortgages’ as a standalone product it’s hard to know which lenders might be best for you without the support of a broker.

To give you an idea of the range of products available though, one of the most well known family assisted mortgage options is the Barclays springboard mortgage, which requires just a 10% security deposit.

Rates at the time for writing, fixed for the first five years, are 3.7% if you can’t afford any deposit yourself and need 100% LTV, or 3.5% if you’re able to put down 5%.

Guarantor mortgages tend to be offered by the smaller building societies rather than high street banks and you’ll find lower LTV requirements and less competitive rates because of the higher risk. The Harpenden Building Society for example is currently accepting guarantor applications but with a LTV of 80%.

While there are a good number of lenders open to shared ownership mortgages, criteria do vary significantly and many will have specific requirements and limits on things like minimum and maximum initial shares as well as deposit requirements.

Leeds Building Society for example doesn’t accept applications from Scotland, has a minimum 25% initial share requirement and requires a minimum 5% deposit.

Can you get a mortgage if you’re on a graduate scheme?

Yes, as long as the particular scheme you’re on is paid and permanent. Even if you haven’t yet started the job, there may be lenders who are prepared to make you a mortgage offer as long as you can provide evidence of your contract.

The only issue may be if you have a probationary period to work – most lenders prefer you to have completed any probationary period and be in a permanent role.

If you’re not on a graduate scheme then being new in a role still needn’t be a deal breaker. There are a good number of lenders who are happy to lend to someone who has only just started a job as long as they can show it’s permanent, and almost all will be happy once you meet the 3-6 month mark, so it may just be a matter of waiting a few months to get the best deal.

Get matched with a broker specialising in mortgages for graduates

The best way to land a great mortgage deal as a graduate is to use a broker who specialises in that market. They will have the experience and contacts to ensure that you get the best rates and terms for your situation.

Our free broker-matching service will quickly assess your needs and match you with the advisor who’s best suited to you.

Call 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and a graduate mortgage broker today.