Different ways for parents to get a Mortgage to pay for university fees
With university fees and costs at such a high level, it is not uncommon for parents to turn to their mortgage to pay for university fees, courses, and accommodation. In this article, we explore what approach the Mortgage Lenders will take when assessing a remortgage application to pay for university fees and costs.
1) Equity / Mortgage level
The viability of remortgaging to pay for university fees and accommodation is down to the “equity” you have in your home and the maximum mortgage level. What is meant be “equity” it is the difference between any finance currently secured against the property (typically a mortgage used to buy the property) and the current value of the property appraised by the Mortgage Lender’s Valuer.
For example – you have a home worth £550,000. It has an existing mortgage of £450,000. So, the property has an equity of £100,000. However, no Mortgage Lender is going to allow you to remortgage to the whole mortgage value, i.e. give you a 100% remortgage; the best you are going to get is 95%. £550,000 * 95% = £522,500. £522,500 less £450,000 existing mortgage means you are releasing £72,500 towards your university fees and accommodation.
2) Mortgage Affordability for university fees and accommodation remortgage
The initial assessment will not take long, but I strongly recommend you work this through with a professional Mortgage Broker such as Niche Advice; otherwise, you may miss out on a particular calculation offered by a certain Mortgage Lender. As a rough guide, normally, you are limited to around four to five-and-a-half times your annual salary as a maximum mortgage.
3) Other considerations to get a Remortgage to pay for university fees
- The Mortgage Lender will expect the university fees to match up to the typical £9,250 (as per the academic year entry 2024) a year and may require evidence.
- With the accommodation costs, you can either raise funds to put into savings for this reason or pay for the first year’s accommodation upfront with the savings balance. The Mortgage Underwriter will seek confirmation of your intentions.
- The Mortgage Lender will consider a remortgage for university fees and university accommodation, but it can be either. It does not need to be both.
- The Mortgage Lender may also consider borrowing money for other purposes simultaneously.
- Are you currently in an early repayment charge period, and if so, can you wait?
- Do you have a current mortgage? Some Mortgage Lenders do not lend on mortgage-free properties, otherwise known as unencumbered.
- In addition to loan-to-value restrictions, some Mortgage Lenders might have a secondary rule limiting the amount of additional borrowing to a monetary sum such as £50,000.
- If you have already used a student loan and are looking to “debt consolidate,” this is unlikely to be a good idea. Student loans only become repayable once earnings reach a certain level, so this should be discussed with a professional Mortgage Broker, such as Niche Advice.
- There are Mortgage Lenders who will consider poor credit profiles, but normally, you are looking at a maximum loan-to-value of 85%.
- Your age, as the eldest applicant, is likely to be limited to 75 years old at the end of the conventional mortgage term. However, specialists in retirement mortgages may be available to extend this.
- You should also consider other forms of finance, such as student loans, personal loans and second-charge secured loans.
If you currently own a property and are looking to fund a mortgage to pay for university fees, courses, and accommodation, Niche Advice is here to give you the right Mortgage Advice.
Other useful sites to look at GOV site on Student finance for undergraduates
Check out more information on Mortgage on the Niche Youtube Channel
