With over 80% of UK students in 2004 who were eligible for financial support via The Student Support Scheme opting to take the support offered according to official statistics provided by The Student Loans Company, many of those now graduates and UK university leavers have since or are now attempting to get onto th property ladder. If you are one of such people, it is important to understand how any student loan amount(s) you have outstanding could potentially affect your chances of being approved for a mortgage.
Hence, here are answers to the three most frequently asked questions made by those with student loans who are attempting to have a mortgage application approved.
Will A Student Loan Affect My Chances?
Unfortunately, there is no finite answer to this question, as lenders offer mortgages according to their own criteria, and every person’s situation is unique. That said, the majority of lenders are far more interested in and will as such focus their attention for the most part on an individual’s overall annual income set against their monthly outgoings, and subsequently a potential borrower’s management of both.
If a mortgage lender does take a borrower’s student loan status into consideration, they will do so most often to look at whether you are making loan repayments. If you are making repayments then most lenders will factor those repayments like any others, and alongside any other repayments you are making as part of a standard affordability test. Meanwhile, if repayments are not being made a lender will want to look at why. In most cases student loan repayments are not made until a person’s income has reached a certain threshold. If this is the case, it is probable that a lender will be satisfied at turning their attention instead to a person’s credit rating.
Does A Student Loan Affect a Person’s Credit Rating?
Considering lenders are more interested in a person’s overall credit rating than any specific student loan they might have outstanding, the second question many student loan holders ask is whether a student loan impacts on their credit rating.
Student loans do not usually impact on a person’s credit rating in the way that credit card loans (to give one example) can because student loans do not work in the same way as other types of loans. In fact, and as is stated via the So Smart Money website: ‘If you took out a student loan post-1998, this won’t show up on your credit rating, so if you’re applying for any other forms of credit such as a mortgage or a credit card then having a student loan shouldn’t cast a dark shadow over your application in terms of your credit history.’
What If I Have Missed / Deferred or Mismanaged Student Loan Repayments?
Even a student loan which does not affect or detrimentally affect your overall credit rating can affect, as aforementioned, your overall chance of having a mortgage application made. So, if you have met or your annual income exceeds the amount at which the Student loans Company required you to begin making loan repayments and you have failed to do so, missed payments or otherwise failed to comply with the terms of your student loan, a lender may take this into consideration .
Then, even if it does not damage your credit rating, mismanaging a student loan can still damage your chances of being approved for a mortgage. Fortunately, if this is something you are concerned about, there are experts in the form of mortgage brokers such as ourselves here at Search Mortgage Solutions who you can turn to for help and tailored advice, as you might need it.