If you’re doing a PhD and you’re ready to buy a home you may be annoyed at the lack of PhD stipend mortgage options. Rest assured, you can get a mortgage with stipend income. Read on for more information.
Last updated: 26th September 2021
Can stipend income be used to qualify for a mortgage
Yes. Not many mortgage lenders will consider offering you a mortgage based on stipend though. If you are set on buying a home while doing a PhD it is possible with stipend, however you will have to approach the right lender.
A specialist stipend Mortgage Broker will be able to tell you your options.
Do you need to apply with somebody else who isn’t on stipend?
No. There are stipend mortgage options if you are buying by yourself and all your income is from stipend.
There are also some lenders that will only consider your stipend if there is somebody else named on the application with a salary.
Can two people on PhD stipend apply for a mortgage together?
Yes. There are stipend mortgages available even when two people are buying together on a joint application and all their income is from stipend.
You’ll both be able to be on a joint mortgage and own the home together. You don’t need to be married or even in a relationship, you could purchase with a friend or relative.
How much can you borrow with a stipend mortgage?
As a rough guide most banks and building societies will allow a maximum mortgage of about 4.5 times your usable income. Your usable income varies between lenders and most don’t include stipend, though a couple do.
They will then reduce what you can borrow depending on how much your credit commitments are. These include loan payments, including car finance, and credit card balances.
How much you can borrow examples
|Income||Credit commitments||Maximum mortgage amount|
|Applicant One Stipend||Applicant Two Stipend||Income from employment||Monthly loan payments||Credit card balance||Stipend specialist lender||Highstreet bank|
These examples assume a single person or couple with typical spending and no dependents. These are possible outcomes and require credit data and other criteria to fit a lender’s criteria. The most reliable way to assess your affordability is to contact a specialist stipend Mortgage Broker.
Can I use a side job to increase what I can borrow?
Yes. Income you earn elsewhere from employment or self employment could be used to increase the size of your mortgage. We will need to demonstrate to a lender that it is sustainable. They may want you to have been in employment for the last 6 months and may check that the hours are realistic.
Somebody with a PhD stipend may not get a mortgage if it requires them to work a 40 hour a week job on top of their research. It will be treated on a case by case basis.
In fact some lenders will only use your stipend if it can be classed as secondary income. This means there is at least one other source of income on the application.
What size deposit is needed for a stipend mortgage?
At the moment the smallest deposit needed is 5%. You can boost your deposit by opening a Lifetime ISA.
Most banks will allow your deposit to come in part or entirely from a gift from a close family member.
The larger the deposit you have the lower the interest rate you can expect. will make the repayments on your mortgage lower.
Keep in mind that to qualify with a smaller deposit your credit score will have to be good. It can helps if you can show a history of good credit, over no history at all. Having repaid a small loan in the past might give a bank more confidence in you, but it’s not guaranteed.
Can a First time Buyer get a stipend mortgage?
Absolutely. There are lenders that will consider your stipend income for a mortgage to help you buy your first home. They’ll consider PhD stipend for moving home too.
Buying your own place could leave you better off each month as mortgage payments are often lower than rents on the same property. It’s important to consider your entire financial position before making the decision though.
Many of my clients plan to transfer their mortgage to a buy to let mortgage once they finish their PhD.
How does student debt affect getting a stipend mortgage?
Amazingly your student debt shouldn’t actually count against you.
Banks determine how much they are happy to lend to you by looking at your income and your commitments. However, if you aren’t earning enough money to repay your student loans then the banks won’t penalise you for having them. They are more interested in your monthly payments as opposed to the total level of debt.
You can see the thresholds at which you start to repay your student loan here, but as stipend isn’t usually classed as taxable income you might not be affected even if your stipend is over these thresholds.
Read more about how student loans affect getting a mortgage.
Does other debt affect getting a stipend mortgage?
Other debts absolutely do affect how much a lender will loan to you for a mortgage. This is true whether you are looking for a stipend mortgage or a regular mortgage.
When making their decision on how much you can borrow a bank will look at your committed monthly expenditure. They’ll take into account the total level of debt, but they are more interested in your monthly payments.
For every pound you are committed to paying a personal loan or car finance, this is a pound that cannot be used to fund the mortgage. This causes the bank to reduce what they will lend.
For example, somebody with a £10,000 loan repaying £180 back per month over 5 years may actually be able to get a larger mortgage than somebody with a £5,000 loan who is repaying £220 per month over 2 years. This is true for car finance too.
Credit card balances have the same affect. Lenders take three to five percent of the balance and add this as a monthly commitment, even if you have an interest free account.
Do you need your stipend income to be paid monthly to qualify for a mortgage?
No. You can be considered for a stipend mortgage even if it is paid quarterly. Some lenders may consider other payment frequencies too.
Just make sure that it is being paid into your UK bank account.
How long do you need to have been receiving stipend to apply for a mortgage?
Some lenders will ask you to prove that you have been receiving stipend for so many months, or years, to consider you for a mortgage. They may also want it to run for a minimum time in to the future.
There are also options available where your stipend has been confirmed, but you haven’t had your first payment yet.
Does my field of study affect if I qualify for a stipend mortgage?
Potentially, but there’s no definitive list. Some lenders say any field is acceptable. We will just need to demonstrate to the underwriter at a lender that accepts PhD stipend, that your future income and earning potential will meet or exceed what your stipend is when you become employed.
Can Clergy receiving stipend get a mortgage?
Yes. Most of what has been said in this article also applies to Clergy receiving stipend. Charity workers are also acceptable, not just PhD students!
Why do most banks decline applications for a stipend mortgage?
Banks and building societies want to be confident somebody they lend money to will be able to afford the repayment over the entire term of the mortgage. Given that mortgages usually span many decades, and stipend is only paid for a few years, this makes them nervous. For the same reason they are very cautious when lending to people on fixed term contracts as the income isn’t guaranteed for the term of the mortgage.
“But somebody with a full time job isn’t guaranteed to have an income for the term of a mortgage” I hear you cry. And you’re right. They could lose their job for a whole load of reasons. And there’s no guarantee they’ll find a new one.
Most banks say we know for a fact that your stipend will end, we don’t know for a fact an employed person will lose their job.
This is where we need to find a lender with a common-sense approach. A lender that recognises that if you can afford a mortgage on stipend before you get full time employment, you’re quite likely to be able to afford it when you finish your PhD. It’s thanks to these lenders who recognise your earnings potential that you can buy a home while doing a PhD.
Can you use PhD stipend income with the Help to Buy equity loan scheme?
Where can I get a stipend mortgage?
As you’re a specialist borrower your best course of action would be to contact a Mortgage Broker that specialises in getting stipend mortgages. Most mortgage brokers will tell you it can’t be done, but a stipend specialist, like say, me, will show you too can find a mortgage.
Can’t I just ask my own bank, they see my stipend payment every month?
As most banks don’t offer mortgages to people on a stipend it’s unlikely that going directly to your bank will help. That’s annoying. Especially if you’ve been banking with them for a long time, and they can see your regular stipend income.
Lending decisions are very black and white and for most lenders stipend income is simply unacceptable.
How much does stipend mortgage advice cost?
For stipend mortgage advice I charge a £245 fee. This is paid after our initial meeting and prior to research commencing. I then receive commission from the lender.
If I can’t get you a mortgage offer then the fee will be returned in full.