Stipend Mortgage | PhD Mortgage

Stipend Mortgage

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. 

After reading this page you should read the pages on do you qualify for a stipend mortgage and how much can you borrow with a stipend mortgage.

Last updated: 9th January 2022

Stipend Mortgages

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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.

Why don’t most banks consider stipend for mortgages?

Can you get a mortgage on a graduate programme?

Stipend Mortgage

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.

What documents are needed?

To get you a mortgage using your stipend I’ll request the following:

  • A letter from your university or doctoral center confirming your dates of enrollment and your stipend amount and duration
    • If you get stipend remittance statements that’s great but they aren’t essential
  • At least 3 months bank statements showing your stipend and expenditure
    • If you’ve only just started receiving your stipend I just need to see it on one statement
  • Proof of your deposit
  • Depending on your circumstances a couple of other things like a sheet for you to complete about your spending, and you credit file, just standard mortgage stuff regardless of a stipend being involved

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.

Stipend Mortgage

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

With the right amount of deposit and income it can be possible to borrow five times total income. Between 4 and 4.5 times your income is more common though.

 

The How Much Can You Borrow page goes into greater detail as to what you may be able to borrow.

What can be used as income alongside your stipend is discussed in the Do You Qualify page.

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.

There are loads of extra rules when using a second job. I cover the on the Do You Qualify for a Stipend Mortgage page.

Stipend Mortgage

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. Your parent’s could even take a legal charge on your property if they wanted to gift you a large amount to help you buy a place, but still have their money protected to some degree. You could then repay this when you sell or have a salary large enough to allow you to remortgage the property for a larger amount.

The larger the deposit you have the lower the interest rate you can expect. A larger deposit will make the repayments on your mortgage lower overall. 

Keep in mind that to qualify with a smaller deposit your credit score will have to be good. It can help 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.

See more things to consider when arranging your first mortgage.

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?

So long as you have received your first payment you stand a good chance. 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 are usually more concerned with how long is left remaining on the stipend though.

To have the most options you need 12 months remaining. If you have over six months remaining you still may be considered if there is another form of income on your application. This could be a side job or income from a partner.

The Do You Qualify for a Stipend Mortgage page goes into more detail on this. Select your individual circumstances and see if you are likely to qualify.

Stipend Mortgage

Does my field of study affect if I qualify for a stipend mortgage?

No really.  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 can make 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?

The Help to Buy scheme may accept stipend in some circumstances. 

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 that it can.

What does a Mortgage Broker do?

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.

Stipend Mortgage

Why use a Stipend Mortgage Specialist?

Most Mortgage Brokers will probably tell you a mortgage with a stipend can’t be done. I don’t blame them, I’d have told you that too once.

Using a stipend specialist will save you time as I already know the answers and have experience submitting cases with stipend income to mortgage lenders. I don’t claim to be an expert in all types of mortgages, but when it comes to stipends, I’m the man. If you came asking if a salary paid in Hong Kong Dollars can be used I could probably sort it in time, but you’d be better off searching for somebody who specialises in that as they’ll know the answer right away and know how to present it to the lender. 

Why do I specialise in PhD Mortgages?

It happened by accident really. A Friend of mine asked if she could use her stipend to get a mortgage. I asked her what a stipend is, she explained it, and I said no, no chance. It’s not taxable so it won’t be treated as an income. 

I then came across a lender that happened to accept it as income. I did a little more digging and found a few more.

It turned out I really enjoyed helping people in this situation, especially when they’ve been told it can’t be done by their bank or another broker. My clients are solo buyers wanting to avoid four years of rent, and many are couples where one already earns a good salary. Helping these people buy (usually) their first house was really rewarding so I set out to try ad help more.

It also helps that people doing PhDs are usually quite interesting. Before talking about mortgages I love finding out a bit about your work. I’ve got clients curing cancer, working on ways to grow human skin so we can stop tensing on animals, hydro-engineers, arts, you name it. 

Ultimately, I want to do a good enough job so that you’ll also come back to me in a few years time when you’re a doctor in your field and I’ll help you buy your next house too. It should be  a lot simpler by then so I typically don’t charge returning clients. 

Do You Qualify for a Stipend Mortgage?

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.

Read more about my fees and how I set them.