Graduate Mortgages

Many first-time home buyers are university graduates. If you graduated from a UK university, you may be eligible for a graduate mortgage. Many lenders offer this type of mortgage to graduates employed in a professional career with an income that is expected to rise.

Relatively new to the mortgage market, graduate mortgages usually have minimum set up fees and very flexible features. Because you were a student, most lenders take into account that you may not have the money for a deposit. A lender may offer a 100% mortgage and include a 2% unsecured loan upon completion of the deal. As well, many lenders offer to pay costs as part of their deal.

Lender Stipulations

Most lenders will attach certain conditions to graduate mortgages. Some lenders will only offer the mortgage to graduates of particular universities. As well, lenders may offer the mortgages to graduates in certain subjects. These mortgages may only be offered if you have graduated within a certain time period. A parent or guardian may act as a guarantor, securing a loan against their own assets. The lender will then stipulate that when the mortgage borrower is making enough to cover repayments, the guarantor will be released from the agreement. It is also important to note that income multiples are usually up to four times the borrower’s salary, although some mortgage lenders will go above this.

The borrower must be over 21 years of age and have a degree from a recognized UK university. The borrower must also have permanent employment and any new employee probation period must be completed. Banks are likely to look closely at student debt and credit card debt to ensure the borrower can afford repayments.

Included Costs

Often, the loans include lending to cover costs such as legal fees and stamp duty. Borrowers should avoid loans with a HLC (High Lending Charges.)

Considerations

In recent years, the large increase in housing prices has made it difficult for first time buyers to acquire a new home. Graduate mortgages were initiated to target young first time buyers who would normally be unable to buy property. This type of mortgage was created to help them overcome home buying obstacles. While graduate mortgages offer some product advantages, they are not very competitive. Overall, graduate mortgages cannot compete against standard mortgages with high LTVs. As well, lenders are seeing a rise in bad debt. Mortgage arrears and repossessions are also increasing. However, graduate mortgages offer a number of product features that make them more attractive for certain borrower groups. Unfortunately, the market is losing out because of the lack of knowledge. It is important to find a lender that provides real value and markets through the appropriate networks. The key is to find an innovative lender that is able to distinguish itself from the other competitors. It is important to understand all aspects of the mortgage. If you fail to make repayments, your new home may be repossessed.