Owning a house during your university years may sound ambitious, but home ownership is becoming an increasingly relevant subject among students within the UK. As rental costs climb, and owning property can become financially advantageous, students are increasingly concerned: Can students seriously buy a house in the UK?
Can Honestly, Students Own Property in the UK?
Students in the UK are facing unprecedented living costs, with rent in university towns often taking up a significant chunk of students’ finances. This makes property ownership, as opposed to renting, an area of interest. But can a student actually buy a house? The short answer is yes, but it’s not without challenges and careful planning.
Why This Matters
Owning a home can often mean more for students than financial security, it’s a way to bank for their future, evade rapidly rising rent and even earn an income by leasing rooms. But for this dream to come true, students must know the way, the alternatives and the possible obstacles.
Step by Step let’s breakdown the answer.
- What student property ownership looks like in the UK
- Why Would a Student Even Want to Buy a House?
- Here are a few reasons student should consider buying property whilst studying:
Soaring Rent: Rental prices in the UK are soaring, particularly in urban areas such as London, Manchester and Edinburgh. For students expecting to stay put for the duration of their schooling, purchasing a home may save money over the long run.
Building equity: By owning instead of renting, students are not filling a landlord’s pocket but building their own equity! That means what you spend on monthly mortgage payments helps pay off an asset that increases in value over time.
Potential For Rent Income: If a student owns a home that has extra rooms, it will be able to rent to a roommate or other students to offset the mortgage.
Mortgage Options for Students
While options do exist in the UK mortgage market that are more suited to students, these tend to have specific criteria:
Buy-for-University Mortgages: These allow a student to buy property with a guarantor (often a parent). They let students stay in the property while renting out extra rooms to pay the bills.
Parental Guarantor Schemes: For students without a steady income or credit history, it may be possible for parents to co-sign the mortgage and effectively take on financial responsibility.
Different Types of Mortgages for Students
Buy-for-University Mortgages
Students often opt for buy-for-university mortgages. Here’s how they work:
Definition: These mortgages help students purchase a home and rent out excess rooms to pay the bills. They sometimes include interest-only repayment features, which can make them manageable during the student years.
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Benefits:
- Interest during studies paid only.
- You can choose to use your properties to generate rental income.
Requirements:
A guarantor (typically a parent) is also mandatory.
- The property has to fit specified criteria (e.g., location, square footage).
- Some students believe that they won’t be able to qualify for traditional mortgages.
- Although traditional mortgages exist, they can be more difficult for students to obtain for the following reasons:
Challenges:
Limited or no income.
Lack of credit history.
High deposit requirements (generally 10-20% of the property value).
Guarantors: In such cases, parents or guardians become the guarantor providing financial support to meet lender requirement.
Disadvantages of Purchasing a House as a Student
Financial Advantages
Long-term Investment: Owning a property is typically seen as one of the safest long-term investments. UK property tends to appreciate over time, providing a financial security.
Rent: On the other hand, if some students want to make extra money, income from renting out rooms can be used to pay mortgage payments, utility bills, etc.
Lifestyle Benefits
Independence: A house allows students greater independence from shared accommodations.
Customization: Student homeowners can decorate and furnish their house however they choose, unlike rented properties, making for a comfortable living environment.
Exemptions and Discounts
Council Tax Reduction: Most colleges and universities exempt full-time students from paying council tax, thus saving costs.
Travel Discounts: If students reside in particular places like London, they are also entitled to reduced travel fares.
Problems Faced by Students to Purchase Living Property
Financial Hurdles
Low Income: Most students can only work part-time or be supported by their parents, which makes it difficult to save for a deposit.
High Property Prices University towns tend to have inflated property prices which inevitably means larger deposits and bigger mortgages.
Complexities of Mortgage Underwriting
Strict Lending Criteria – Banks consider students having low/sufficient income and credit history thus make them high-risk borrowers.
Reliance on Guarantors: Most lenders expect borrowers to have a guarantor before offering a mortgage, thereby enlisting parental financial support.
What happens after you graduate?
Upon graduation, students have the option to either retain the property (and operate it as a rental investment) or sell the property. You may need to switch to a standard or buy-to-let mortgage.
How Students Can Rent a House in the UK
Research and Planning
- Narrow down to properties that are proximity to universities or in demand rental areas.
- Learn about mortgage optionsLook for buy-for-university and guarantor mortgages.
Financial Preparation
- Save for a Deposit: You’ll need a 5-10% deposit for most mortgages
- Boost Your Credit Scores: A positive credit history improves the likelihood of getting a mortgage.
Applying for Mortgages
- Collect the Necessary Documentation: Income statements, guarantor, and IDs.
- Compare Deals: Online Comparison Tools for Mortgage Selection
Managing the Property
- Rent out Extra Rooms: This can offset monthly mortgage payments.
- Tend to the Property: Regular maintenance will be required to keep its value
Real Life Examples & Case Studies
Success Story of International Student
An Indian postgraduate student who studies in Manchester bought a two-bedroom flat with the assistance of a buy-for-university mortgage. They were able to recoup 70% of their mortgage payments by renting out that second room. Once they graduated, they turned the property into a buy-to-let investment.
Parental Support Example
In London, a UK-based student used a guarantor mortgage with the backing of their parents. The property had gained 15% in value in three years, a hefty return on investment.
Professional Advice for New Property Investors
- Seek professional advice — make use of mortgage advisors so you know what you can and cannot do.
- Locate Property Close to Universities: Find communities or properties with a high demand for rent.
- Prepare for the Future — Discuss plans for after graduation (Are you going to rent or sell the property?
Conclusion
With the right strategy and assistance, you could even buy a house as a student in the UK, and having a property certainly doesn’t mean you should stop your studies. And, although high prices and stringent lending criteria are daunting, student-friendly mortgages and guarantor schemes have made it possible for many.
For those who think they would like to take this route, research your options, prepare your finances and get professional advice. If you play your cards right, property ownership can be a springboard to long-term financial security.
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