Student Guide To Mortgages

In the UK, there is a strong desire for people to own their own house. This deep seated desire is one of the factors behind the extraordinary rise in UK house prices. However, the cost of houses means that it is becoming increasingly difficult for people to get on the property ladder. To be able to buy a house, bigger and more risky mortgages are often being taken out.

These are some of the pitfalls behind taking out a mortgage.

  • Average house prices have increased faster than incomes.
  • House Prices are not guaranteed to keep rising
  • Mortgage payments for first time buyers take a high % of income
  • Variable interest rates in the UK. This means the cost of mortgage can change quite often. In the short term, interest rates are unlikely to increase; but, in the medium to long term it is difficult to predict

To get a mortgage students may have to consider an unconventional type of mortgage or ask for help from parents. These are Some options for a student to get their first mortgage

Interest Only mortgage. This means that you don’t make any capital repayments, therefore you need to find an alternative investment scheme. Interest only mortgages may be an option, but, only for those who expect their income to increase in the near future – making it easier to switch to a repayment mortgage.

Joint Mortgage. This is becoming increasingly popular as a way to be able to afford a mortgage. A joint mortgage enables you to share your income with another person to be able to get a bigger mortgage.

Deposit from Parents. Unfortunately, this is often necessary to be able to get a mortgage. With a deposit from parents you have a better chance of getting a mortgage. Generally, the bigger the mortgage deposit, the more chance there is of getting lower interest rate on your mortgage.

Government Mortgage Scheme. In the UK, the government do offer some help to key public sector workers for buying a house. However, these tend to be restricted to a small number of people. If you are a public sector worker such as teacher, nurse or policeman it may be worth checking out.

By on November 1st, 2007