Graduate Mortgages
You've got the degree, you've got a decent job and the prospects look bright.
OK you may have some student loans to repay but you feel you've joined the 'club' ~ (whether you like it or not). But the surest sign of membership of the ‘club’ is home ownership and a mortgage.House prices and any mortgage lenders who fail to see your future potential are denying you that.
What you ideally need as a graduate to get you started is a mortgage where you can borrow 100% + of the purchase price and a higher multiple of your salary, say five times plus. Realistically, some lenders would run a mile at the suggestion, and ignore the fact that you are really the type of customers they wish to have now and for the future.
Others however have a different idea and are more willing to appreciate your position.
Finding a Mortgage for a Graduate
As a graduate, probably on a good but not stunning income and with little in the way of capital behind you, it could be a struggle.Here are a few possibilities:
Are you employed by a FTSE 100 or in a profession?
If so, we have a scheme that may suit you.- Income multiples of up to 5 x single income or 3.5 x joint incomes (Reviewable depending on applicants)
- Competitive Interest rates
- Maximum Loan to Value lending
- Fees can be added to the loan
If you don't qualify for this scheme, perhaps you can enlist some help to achieve that all-important purchase.
A joint mortgage for Graduates?
But not a guarantor mortgage. It involves your parent being a party to the mortgage, allowing their income to be included in the calculations. And even if they have mortgage commitments of their own, these can be allowed for in a very advantageous way. The following example illustrates how the calculation works:
If so, we have a scheme that may suit you.
- Income multiples of up to 5 x single income or 3.5 x joint incomes
- Competitive Interest rates
- Maximum loan to value 125%
- Free Mortgage Indemnity Guarantee Premium up to 90%
- Arrangement fee can be added to the loan at completion
Suppose you are earning £22,000 a year. Normally the maximum loan would be five times salary i.e. £110,000. In order to purchase a two bedroomed house valued at £200,000 a deposit of £90,000 would be required. Not terribly realistic under normal circumstances.
But this is how it could look if your parents such as your parents are prepared to help out.
Let's say he/she earns £45,000 a year and has a mortgage of £50,000 on their own house.
Under the special scheme, the income calculation works as follows:
Parents income £45,000 less Parents mortgage payments £3,600 (£300pm) (Other financial obligations may also be taken into consideration by the lender when calculating the remaining balance. Balance = £41,400 x 5 = £207,000 Plus your income £22,000 Maximum advance £229,000.
The mortgage is a joint one between parent and graduate child but ownership of the property need not be joint; it can be in the sole name of the graduate child if that is preferred.
- Maximum loan usually 95% of the purchase price or valuation, whichever is the lower. (Product variations may improve this)
- No Mortgage Indemnity Guarantee premium to pay with certain lenders.
- Scheme can be open to all occupations, not just graduates although professions are usually given greater consideration.
- Choice of interest products, all of which are competitive.
- Minimum age 21 for the child and 60 for the parent at application.
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Help with the deposit option
Increasingly, parents and other close family members such as grandparents are helping graduates to get a mortgage by agreeing to provide the difference between the purchase price and what can be raised as a mortgage.A recent survey showed that the average first time buyer loan is 77% of the purchase price (source: - Council of Mortgage Lenders).
On a purchase price of £150,000 that means a loan of £115,500 and a deposit of £34,500.
One way of making this possible is for parents to re-mortgage or raise a secured loan on their own homes, releasing the money for the deposit
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Guarantor Mortgages for Graduates
If you are a graduate in a profession such as a doctor, dentist, vet, solicitor, or any other of the professions you may be able to borrow up to 100% of the purchase price provided a parent is prepared to act as a guarantor for you. The parent is jointly liable for mortgage payments but the mortgage is not a joint mortgage.Suppose you are a trainee solicitor on £22,000 a year and thus eligible for a guarantor mortgage. Parent is on £45,000 a year with a mortgage of £50,000. In this instance the lender would gross up the parents income i.e. £45,000 x 5, which is £225,000 and then deduct their mortgage, leaving a figure of £175,000. Your income cannot be added back in because the mortgage amount is already beyond what could be borrowed without a guarantor. So the maximum loan under a guarantor scheme would be £175,000.
As you can tell, there are quite a few possibilities for graduate mortgages so use the ENQUIRY FORM to provide a few details. Our preferred graduate mortgage advisers, Graduate and Professional Financial Services, will let you know what they can do for you. You can also call us on 0844 800 1137 or use the CALL BACK button.
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