Do you desire to know if your student loan affects getting a mortgage? Then read through this article.
Few of us come out of university nowadays without a significant amount of student debt.
Moreover, you’ll be thinking about how you will get a mortgage when you’ve got ten of thousands of pounds outstanding in student loans. In this article, we’ll take you exactly how student loans can affect mortgages.
READ MORE: Do student loans affect buying a house?
Does My Student Loan Affect a Mortgage?
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The answer is yes, probably. As the amount will vary on you and the lender you apply to. Sometimes the student loan won’t affect your mortgage in some cases.
You need to read and learn exactly how your student loan could affect you when applying for a mortgage. You can read more on Graduate Mortgages and Graduate Mortgage Tips.
How Does A Student Loan Affect A Mortgage?
When mortgage lenders are deciding how much money they will lend to you they focus on three key things. Firstly is how much money you earn. Secondly is how much money you already have committed each month. Thirdly is your track record of repaying money that you owe.
Also, your earning determines the amount you can borrow. The more you owe the less you can borrow. However, the lender is more interested in your monthly payments on what you owe as opposed to the total figure.
It means that two people with the same income, one with a £1,000 student debt might be able to borrow the same amount if their monthly loan payment is the same due to being on the same salary.
Finally, your track record will be reviewed to know your credit score. The higher the score, the more lenders will consider you.
READ MORE: Does having a student loan affect a mortgage application in the UK?
Can You Earn Under The Payment Threshold?
No! If you have not started paying your student loan yet because you don’t earn enough you won’t be penalized. You can check the payment thresholds here.
Moreover, it means that as your income increases, your student loan repayment will also increase.
Thankfully your student loan repayment won’t increase fast than your pay. It means a pay rise that takes you over the student loan payment threshold won’t mean the banks that will lend you less.
If you are self-employed may be asking how a student loan affects a mortgage when you don’t get a pay slip. The lender will cross-check your tax year overview and tax calculations and see how committed you are to your monthly payment.
Do You Have To Tell a Mortgage Lender About Your Student Loan?
Yes! You will need to tell the lender everything they ask. If you withhold them you will have committed, mortgage fraud.
Usually, you or your Mortgage Broker would declare your student loan on a monthly amount in the student loan payment or another committed expenditure box on your mortgage application.
When assessing your case the mortgage underwriter will cross-check the amount. You can do this by reviewing your payslip or Tax Year Overviews and Tax Calculations if you are self-employed.
Maybe you are currently under the student loan payment threshold you won’t need to put anything down. If you start paying back your loan in the future then this will be because you are earning more.
Should You Overpay Your Student Loan To Help Get A Mortgage?
Don’t overpay! Remember that the lender isn’t looking at the total size of your student loan, they are looking at the monthly dedication payment. Moreover, it means in theory they would treat two people both earning £30,000 per year the same even if one had a £10,000 student loan balance.
This is because they would both have the same money available after their mortgage after their student payment every month. However, it means that overpaying your student loan could affect your mortgage options. The money for the overpay the student loan can have been used for a bigger deposit.
Does a Student Loan Count As Income For Mortgage Purposes?
No! As a rule of thumb, if it’s not taxable then it is not income. The lender is not interested if it is not income. A stipend can be counted as income for a mortgage though.
Do The Student Loans Affect Credit Scores When Getting a Mortgage?
No, it doesn’t. In your credit report, you will not find your student loan there, so it can’t affect your credit score.
Additionally, it doesn’t mean the lender won’t know about it though. It will see your student loan repayments on your payslip or tax calculations.
READ MORE: Mortgage Finance Marketer at a Real Estate Investment Company
Conclusion
In short, your student loan can affect a mortgage. Also, to know more about this research how your student loan can affect you when applying for a mortgage. You can read more about it through the Graduate Mortgages.
