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Is a Buy for Uni mortgage the right choice for you?

With the help of family members, students can now purchase a house while at university through what is called a Buy for Uni mortgage.

Some lenders are now offering students up to 100% financing for a property purchase, as long as close relatives agree to pay any shortfall in the monthly mortgage amount. This is known as a Buy for Uni mortgage. Anyone over 18 who is in higher education can apply for a Buy for Uni mortgage, provided they have at least one full academic year of their course remaining on completion of the mortgage.

How does a Buy for Uni mortgage work?

With their family’s help, a student buys a house and rents out spare rooms to friends or fellow students. This rental income helps to cover mortgage payments. Having a Buy for Uni mortgage means students can avoid expensive rental fees, often for substandard accommodation, and get themselves on the property ladder while still in full-time education. Giving back-up support must be members of their immediate family, who can provide security in cash or equity in a property, such as the family home, if the loan is for more than 80% of the value of the property.

How much can be borrowed?

Under the Buy for Uni deal, students can get a loan for up to £400,000. Mortgage providers will assess each application and the actual amount a student can borrow will depend, among other things, on the income that will be received from letting rooms within the property. Where there is insufficient rental income to support the mortgage, the income of the family members supporting them will be considered.

What sort of property is acceptable?

The property must be in England or Wales and have a maximum of three bedrooms. It must also be within a 10-mile radius of the university that the student is attending. There are some properties that mortgage providers will not consider. Former local authority flats, for example, and studio flats that don’t have a separate bedroom and bathroom.

Who can rooms be let to?

Each property must have a maximum of three occupants, including the mortgage holder. The other tenants don’t have to be students, but tenancies must be granted under an Assured Shorthold Tenancy agreement.

Who owns the property?

As with any other mortgage the borrower, which is the student in this case, owns the property. Family members providing support have no rights over the property and their name does not appear on the deeds. However, they must provide a guarantee to pay any shortfall in the monthly mortgage payment amount.

Seek advice

Family members are required to take independent legal advice before the borrower is committed to the purchase. This condition of the mortgage ensures that they understand the commitment they are making and the risk involved in becoming a guarantor.

Only a small number of lenders are offering a Buy for Uni mortgage, and there are many things to consider when deciding if it’s the best choice for you. The experienced mortgage advisers at George Square Financial Management are happy to take you through your options and help you make an informed decision. 

For a free mortgage consultation, call our team of independent mortgage advisers on 0115 947 5545.

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