If you are looking for graduate mortgages because you have recently graduated or you are about to graduate then you are in the right place. If you are looking for mortgages to fund your own place while you are a student, see this article.
Last Updated: 10th July 2021
What are graduate mortgages?
There aren’t any specific graduate mortgages per se, but there are ‘professional mortgages’. But there are some things to consider if you are a graduate, and some graduates can borrow more.
There are some government run schemes to help you buy a home too. These aren’t exclusively for graduates though. These include:
What deposit do graduates need for a mortgage?
Five percent. That’s the minimum.
If you have a ‘thin’ credit file though, that means you haven’t got much credit history, the lender may ask for a larger deposit.
A larger deposit will help you qualify with more lenders though and get you a lower cost mortgage overall.
Can my parents help with my deposit?
Of course. Most graduates looking for a mortgage have small deposits as they haven’t had much time to save yet. One way to get around this is for your parents to help.
The simplest way, and in my opinion the best way, is for a family member to gift you some money to fund some or all of your deposit, if they can.
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.
Currently it is possible to borrow more if you have a certain salary. For example if your graduate salary is £31,000 or greater they may consider lending 5.5 times your income as apposed to a maximum of 4.5 times your income if your salary was under £31,000.
For a joint application this only needs to be £50,000 between you to potentially borrow 5.5x your joint income.
Are there graduate mortgages for certain professions?
There are mortgage products available 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:
- Chartered Accountant
- Commercial Pilot
A couple of lenders will consider lending more than they normally would to; Engineers, Pharmacists, Teachers, and Vets.
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 before graduating or starting a job?
Yes. Some lenders may offer you a mortgage before you have even started a job. They will need to see things like your employment contract.
So long as you have a signed contract there are lenders available up to six months before your contract starts.
It is a myth that you need at least three months pay slips to get a mortgage.
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,find out what it costs to get a Mortgage Broker to help you, and learn what to consider when choosing a Mortgage Broker.
Graduate mortgages on a fixed term contract
Many lenders are put off by fixed term contracts. Especially if you are fresh out of uni and don’t have much work history, or a history of fixed term contract extensions.
If you are hired on a fixed term contract, so long as it’s total duration is 12 months of more then there are mortgage options for you. You can even apply before the fixed term contract begins.
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. You can be considered if you have been self-employed for just one year. It will be difficult though unless you have a specific qualification in the field you are working, or you have some past experience in it.
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.
Can graduates get buy to let mortgages?
You’d be treated like anyone else in your situation. Most banks want you to own your own home before you have a buy to let property. There are a couple of options though for first time buyer first time landlords.
If you are wondering if you could buy a property to live in, but if you have to move away due to work, you can ask the lender for consent to let your property in this scenario.