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What are graduate mortgages?
There aren’t any specific graduate mortgages per se. But there are some things to consider if you are a graduate, and some graduates can borrow more.
Although there’s no such thing as a graduate mortgage there are schemes available to help you buy a home. They just aren’t exclusively for graduates. These include:
Can graduates borrow more?
Sometimes. Most lenders limit what they will lend you to about 4.5 times your annual salary. Some go a bit higher. They then reduce that amount depending on your credit profile.
However there are lenders, such as Kensington, that may offer to lend more money to ‘young professionals’. These could be seen as graduate mortgages, but technically you don’t need to be a graduate to get one. At the time of writing they will consider lending six times your annual salary if you are fully qualified and practising as a:
- Charted Accountant
- Commercial Pilot
Lenders such as Scottish Widows will consider lending more than they normally would to; Engineers, Pharmacists, Teachers, and Vets.
Please don’t tell the other Mortgage Brokers that I’m giving the graduate mortgage secrets away!
Just because you can borrow more with some graduate mortgages doesn’t mean you should
Most people in these positions do not use these specialist graduate mortgages. If a standard mortgage allows them to purchase the home they want, a home buyer will usually go with that over a graduate mortgage. This is because the interest rate and arrangement fees are usually lower.
As a graduate you may actually be able to borrow less than a non-graduate! See here to learn why and how to avoid getting penalised.
Can you get a mortgage on a graduate scheme?
Yes. I got my first mortgage while on a graduate training scheme. So long as you are on a permanent contract, you’ll be treated like any other employee applying for a mortgage.
There are a few things you might want to consider more than normal if getting a mortgage while on a graduate scheme. These include:
- how long to fix for
- how much flexibility does your mortgage need
- what will happen to your income in the future
- what if you need to move for work
Your Mortgage Broker will be able to guide you through the things you need to consider. See more things to consider.
Getting a mortgage if you go self-employed after graduating
You may have heard that you need a minimum of two years accounts to be considered for a mortgage. If so, you have heard wrong. Halifax will consider you if you have been self-employed for just one year.
Again, please don’t let the other Mortgage Brokers know I’m spilling the beans!
Can you get a mortgage before graduating?
Yes. Lenders like Nationwide may offer you a mortgage before you have even started a job. They will need to see things like your employment contract. You may have to start the job before a lender agrees to release the funds, but you can get everything moving ahead of time.
It’s a myth that you need at least three months pay slips to get a mortgage. You can see my FAQs for the documents you’ll need.
How does a student loan affect getting a mortgage?
Below is the short answer, this is the long answer.
When deciding how much a lender will lend to you, they will consider your income and your credit commitments. Unsurprisingly the more you earn the more they’ll lend. However, the more commitments you have (expenses that you can’t choose to reduce like personal loans or credit card bills, car finance, and student loans), the less they’ll lend.
This means that two people both earning £30,000, with no personal loans or credit cards could borrow different amounts if one has a student loan deduction from their pay, and the other doesn’t.
Different lenders will reduce what they’ll lend by different amounts so it’s important to apply to the right one. This is one reason why 70% of mortgages in the UK are arranged by a Mortgage Broker.
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