Mortgages for Graduates

We are people, just like you

For those who have recently graduated, or are soon to graduate, you may be wondering what mortgage deals are available to you. 

If you are currently in this situation, carry on reading this guide to see how a graduate mortgage could benefit you.

What are graduate mortgages?

While graduate mortgages aren’t really a specific product available on the market, there are lenders out there who have their own form of graduate mortgages which benefit recently graduated students through more flexible terms and competitive rates. 

Are there any mortgage schemes for graduates?

Yes, there are government made schemes available to help recent graduates get on the property ladder. 

Shared ownership can be a great way to purchase your first home. Under this scheme, you will share the ownership of your home, which is usually between 25-75% and you will then pay rent on the remainder to a housing association. 

Once you gain enough income to do so, you can then purchase the remainder of your home to have full ownership. 

Despite the fact that the Help to Buy Scheme and ISA have now closed, you can still apply for a Lifetime ISA which offers tax breaks on longer-term savings and can be used as a mortgage deposit. 

You can also apply for a joint mortgage with your parents, in which you borrow money for a home with either one or both of your parents. All applicants must meet the lender's borrowing criteria. 

Is it harder to get a mortgage after graduating?

As a graduate, or soon to be graduate, you will likely relate to one of the following:

  • You have a low deposit
  • You need to repay student loans or overdrafts 
  • Your credit score is low
  • You have recently started an entry level role, or you are about to

The factors above may lead lenders to believe you are a high risk borrower, which is what makes it harder for you to get a mortgage. However, there are lenders out there who have more flexible lending criterias for recent graduates.

Can graduates borrow more for a mortgage?

Sometimes lenders will limit what they lend to you at about 4.5 times your annual salary. Others can go a bit higher, but they will reduce the amount depending on your credit score. 

If you have a certain salary, you may be able to borrow more. For example, if your graduate salary is £37,000 or higher, a lender may consider lending 5.5 times your income, as opposed to 4.5 times if your salary was under £37,000.  

Mortgage credit checks for graduates

While income is a main factor that is checked by lenders when determining your affordability, they will also complete a credit check too. 

This can be particularly challenging as you may not have any credit history besides your student loan. While student loans shouldn’t affect your credit score, the lack of credit might.

Having no credit score can be tricky for lenders as they may struggle to assess your situation and decline you as a result. However, as we’ve mentioned, not all lenders are the same and many who provide graduate mortgages will understand the situation you’re in. 

What deposit do graduates need for a mortgage?

The minimum deposit a graduate needs for a mortgage is 5%. If a lender sees that you have a low credit score, you may be required to have a higher deposit of 10%. 

If you are struggling to save for a deposit on your own, you can use what is known as a gifted deposit from friends or family members. There must be no obligation to repay a gifted mortgage and the giftee must sign a waiver to confirm this. 

How does a student loan affect getting a mortgage?

A student loan is generally a lower risk debt in the eyes of a mortgage lender, since it will likely lead to a graduate career, which looks good for your long term repayment potential. 

The main element of concern is how large the student loan is. This is because lenders will need to deduct any financial responsibilities from your income before they can calculate the size of the loan you can afford. 

Some lenders have a maximum debt limit that they accept for applicants, which could mean if you have very large student debts, it may limit the amount lenders are willing to lend to you. 

The amount you have to repay for your student loan will depend on when you took the loan out and how much you earn. Those who don’t need to repay their loan back due to the fact they don’t earn enough won’t be penalised as much. This is because lenders understand your repayments will only rise as your salary increases. 

Do student loans affect credit scores?

No, your student loan will not affect or appear on your credit score. However, it is worth noting that mortgage lenders could take your loan repayments into account when determining your affordability. 

Are there graduate mortgages available for specific professions?

Graduates working in specific fields such as law, medicine or similarly skilled professions may be eligible for what is known as a professional mortgage

If you are trained and qualified in a professional industry, you may be able to get a professional mortgage. For example, if you work in the NHS, you may be able to get a mortgage tailored to NHS employees. 

Can you get a mortgage before graduating?

Yes, some lenders will offer you a mortgage before you have graduated based on the fact you have a job lined up once you have graduated.

Oftentimes, they will need to see your employment contract to be sure that you will have a stream of income to repay the mortgage payments. 

Can graduates get buy-to-let mortgages?

Yes, graduates can get buy-to-let mortgages, but as a graduate you may be considered a higher risk applicant and therefore, you may not have a wider option of lenders compared to getting a mortgage for your own home.