Student loans and mortgage applications

Understandably, student loans, their impact on your future finances, and their terms and conditions, can feel rather daunting and overwhelming- especially given the current cost-of-living crisis, high interest rates, and recent government changes to the already complex student loan system.

 
Helping to relieve some of the anxieties many may be feeling, Brian Murphy, Head of Lending at Mortgage Advice Bureau, offers this reassuring comment explaining the limited impacts a student loan can have on one’s ability to get a mortgage.
 
Brian Murphy, Head of Lending at Mortgage Advice Bureau, says: “The impact a student loan has on an individual’s credit rating and affordability checks is a concern felt by many graduates. Debt can be an anxiety-inducing prospect, especially when there is a lack of understanding around it. Understandably, having loans (let alone those that are worth a good few tens of thousands) can feel rather overwhelming, especially if you think they will affect your future finances. However, the good news is that student loans are complex and thus largely misunderstood.

“Whilst debt is, for the most part, a daunting and intimidating topic, student loans are significantly different from all other types of borrowing. For instance, contrary to the thoughts of many, student loans do not affect one’s credit file or score. Likewise, they do not outright prevent someone from getting a mortgage. Equally, changes to student loan interest rates also do not directly impact your likelihood of having a mortgage application approved.

“Rather than homing in on the fact that you have a student loan, mortgage application assessors will take into consideration the broader picture and consider your financial circumstances as a whole. Being able to budget and save effectively, regardless of whether you have a student loan or not, are two determining factors when it comes down to the success of a mortgage application. For current students and graduates with a student loan, one thing to consider at the moment is the government’s upcoming changes to student loan payback thresholds. For those affected by these changes, it’s advised that you set some time aside to prepare your finances and calculate how this will impact them. Doing so will help you to not get caught out and, if necessary, adjust your spending accordingly.”