Page 3 | Using student loan for mortgage

TheDefiant · 2025-01-27T21:03:48+00:00

My DH and I are trying to set our DC up in a way we never were. We're trying to arrange a joint borrower, sole proprietor mortgage for our DS at Uni. Part of this aim is to get him on the ladder as soon as possible and avoid taking out a student loan. He'd have mates in whose rent would cover the mortgage and just so you know, we'd charge half the going rate in the area to pass on the benefit to his mates. I'm a planner and like to have a back up plan. Do you think, if it came to it, that taking out a student loan after all isn't such a bad thing?

WallaceinAnderland · 27/01/2025 22:30

But if he chooses to not get a loan and to just not pay.

It's not unheard of for young adults at university to change a lot. They meet a lot of new people and are influenced by those around them.

He would own the house and you would have to cover the mortgage. I know you trust him not to do the dirty on you but you would be naive to think it could never happen.

Original poster

TheDefiant · 27/01/2025 22:32

@Changingplace we'd charge less to try and share our "good fortune" around. Also one of flat mates comes from a family where this will make a massive difference to the whole family.

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SkaneTos · 27/01/2025 22:32

You and your son have planned this for months! If you all are sure of it, just go for it!
Good luck!

WallaceinAnderland · 27/01/2025 22:34

It’d be no different to them being guarantor for his rent, most parents do that for students.

That's only for the duration of the contract which is usually 10-12 months. This mortgage would be for the term of the mortgage unless they could pay if off. Completely different financial commitment. Much greater financial risk.

Original poster

TheDefiant · 27/01/2025 22:34

@SkaneTos we've been planning for years!

We started talking about it when he was 16. Maybe before actually when he started getting letters about his child trust fund.

Not much in it but we wanted to encourage him to think ahead.

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BrieHugger · 27/01/2025 22:35

My friends parents did this for him age 19/20 and he lived there for the rest of uni, then when working he had a lodger, then his girlfriend moved in. Over that period of time he essentially lived there for free but made some overpayments, and by 32 he was married, mortgage free, and had a house worth several times what he’d paid for it. Sold it and bought a stunning property while the rest of us were in flats / starter homes.

At the time we took the mick a bit that he was saddled with a house in studentville, but bloody hell his parents were canny.

Do it.

Changingplace · 27/01/2025 22:40

TheDefiant · 27/01/2025 22:32

@Changingplace we'd charge less to try and share our "good fortune" around. Also one of flat mates comes from a family where this will make a massive difference to the whole family.

I think this is where the financial risk comes in, I totally get wanting to to do this for your son, but your the ones taking on the risk on behalf of his mates, I don’t think this idea of charging them so much less is sensible.

I don’t think you’re really in a position to tell his mates exactly what their rent might be until you know exactly what property you’re buying, sounds like you’re still looking?

I do think overall it’s a good idea, it worked out for my sister and parents but don’t potentially do yourself over trying to be a charity for other people.

user989 · 27/01/2025 22:40

The issue is really the funding of it. op can cover the purchase costs and the deposit (which is a nice gift to be able to give her son) but the son may well need to use a student loan to meet the mortgage payments plus living costs plus bills. Still not necessarily a bad plan if the numbers work.

Changingplace · 27/01/2025 22:42

WallaceinAnderland · 27/01/2025 22:34

It’d be no different to them being guarantor for his rent, most parents do that for students.

That's only for the duration of the contract which is usually 10-12 months. This mortgage would be for the term of the mortgage unless they could pay if off. Completely different financial commitment. Much greater financial risk.

It can be sold, my parents did similar for my sister, it worked out much better financially than paying her rent during uni.

Tallblacktrees · 27/01/2025 22:46

What I am struggling with is the student loan side of things.
He has already taken out a student loan this year, interest starts from day one and compounds too.
Once he has a job he will start paying it off at a certain % of his salary (if he earns over a certain amount).
Have you done the calculations that show he would manage to pay it off in a relatively short time frame with an average engineering salary?
Otherwise he might as well take out the further loans if he isn't going to manage to make a dent in it and will be paying it until the end age.

Original poster

TheDefiant · 27/01/2025 22:47

user989 · 27/01/2025 22:40

The issue is really the funding of it. op can cover the purchase costs and the deposit (which is a nice gift to be able to give her son) but the son may well need to use a student loan to meet the mortgage payments plus living costs plus bills. Still not necessarily a bad plan if the numbers work.

That's my thinking. If he rents he'll need the loan anyway.

So if he buys and has to take the loan to fund it he's no worse off really and will have an asset to sell at the end that might make a teeny bit of money.

Son will be contributing around half the deposit, it's not all a gift.

Generally financial advice is to help DC while they are younger. We can do this now, we won't always be able to. We have a window of 10 years where we can do this so it has to be now really.

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Ottika · 27/01/2025 22:49

Define insanity - property obsession in the UK.

Original poster

TheDefiant · 27/01/2025 22:50

BrieHugger · 27/01/2025 22:35

My friends parents did this for him age 19/20 and he lived there for the rest of uni, then when working he had a lodger, then his girlfriend moved in. Over that period of time he essentially lived there for free but made some overpayments, and by 32 he was married, mortgage free, and had a house worth several times what he’d paid for it. Sold it and bought a stunning property while the rest of us were in flats / starter homes.

At the time we took the mick a bit that he was saddled with a house in studentville, but bloody hell his parents were canny.

Do it.

This is part of our thinking. We can help now so we should go for it.

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user989 · 27/01/2025 22:52

TheDefiant · 27/01/2025 22:47

That's my thinking. If he rents he'll need the loan anyway.

So if he buys and has to take the loan to fund it he's no worse off really and will have an asset to sell at the end that might make a teeny bit of money.

Son will be contributing around half the deposit, it's not all a gift.

Generally financial advice is to help DC while they are younger. We can do this now, we won't always be able to. We have a window of 10 years where we can do this so it has to be now really.

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remember he is still going to have living costs (circa £600-700 month minimum particularly in an expensive city)

I don’t actually think it works financially on your particular set up but you know more about your own financial position.

Greyish2025 · 27/01/2025 22:52

TheDefiant · 27/01/2025 22:16

Most student flats don't have a sitting room. The sitting room becomes an additional bedroom. We're only looking at 2 bedroom places. DS will take the "worst" room.

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Not having a sitting room is awfull, where do friends hang out/ they will have to say in their bedrooms all the time, doing that for 4 years would be hell
Charge more rent (400 is ver low) and keep the living room as a communal space

Original poster

TheDefiant · 27/01/2025 22:53

Ottika · 27/01/2025 22:49

Define insanity - property obsession in the UK.

This isn't property obsession! One of the reasons we are considering this is the supply and demand issue in the area.

A couple of years ago friends were forced into buying for their DC as no student accommodation available.

We'd quite happily sell when degree is up and break even. We want him to have a home and not have to fight it out for the next 4 years!

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user989 · 27/01/2025 22:53

If it’s a flat there are presumably also service charges etc to think about

Moonshower · 27/01/2025 22:57

I knew someone whose parents did this and they kept the house for a good few years afterward and rented it out to friends of friends. It set the guy up massively once graduating, the house had increased in a lot of value during the time.

Tallblacktrees · 27/01/2025 22:58

I am also intrigued about where in Scotland rents are £800-1200 pcm/room (sounds like Edinburgh or Glasgow) but where you can pick up a flat cheap enough to have a mortgage of only £666/month!
I mean you would be looking at a hefty deposit and by hefty I am thinking over 100k probably more reasonably 200-300k. If he has that sort of money taking the student loan was silly

Original poster

TheDefiant · 27/01/2025 22:59

Service charges aren't common in Scotland except in really posh flats! He'll have to pay communal repairs and the stair cleaner and that's about it.

To PPs it's really common not to have a separate living room - the kitchen is the communal space.

His living costs aren't that much now. Free travel. Free prescriptions. He's eating on £200 pcm.

If we give him an allowance of £250 pcm and he has no rent costs he can earn whatever else he needs to live on during the summer break or from a part time job.

His laundry is expensive (he has uniform he has to wash often) so having his own washing machine will save him a fortune whether he rents or buys.

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Mamabear999 · 27/01/2025 23:01

I think it is a great idea. I was scrolling property pages tonight in preparation for my daughter going to uni. Halls for the first year and then buy.

Original poster

TheDefiant · 27/01/2025 23:02

Tallblacktrees · 27/01/2025 22:58

I am also intrigued about where in Scotland rents are £800-1200 pcm/room (sounds like Edinburgh or Glasgow) but where you can pick up a flat cheap enough to have a mortgage of only £666/month!
I mean you would be looking at a hefty deposit and by hefty I am thinking over 100k probably more reasonably 200-300k. If he has that sort of money taking the student loan was silly

The agreement in principle amount would be a mortgage of around £800 pcm.

We've found something cheaper...

I'm convinced there's a catch and will have solicitor investigating.

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user989 · 27/01/2025 23:05

TheDefiant · 27/01/2025 23:02

The agreement in principle amount would be a mortgage of around £800 pcm.

We've found something cheaper...

I'm convinced there's a catch and will have solicitor investigating.

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So you’re still paying £2940 per annum of the mortgage yourselves.

all needs factoring in.

he’s one thrifty student though if he lives on £250 a month. Typically it’s double that for living costs. More after the first year when they also have to pay bills.

Chumpfriend · 27/01/2025 23:07

I’ve done this three times. It’s not for the faint hearted and I’d counsel caution depending on the distance. We’ve had all sorts of disasters and trials - including still being accidental landlords due to the cladding scandal. Not ideal.

Friends can and do fall out and leave and your son could end up living with strangers. He’ll also have to deal with the day to day issues that being a live in landlord entails - will he be happy telling his friends/strangers not to leave the kitchen in a mess or leave the heating on all night? If he’s mature enough then I’d say do it.

Keep everything as professional as possible - make sure you get contracts and guarantors - and be prepared for the standards you need to meet, whether a HMO or not. Also be prepared for endless admin.

It worked reasonably well for us and led to my kids having to take on a bit more responsibility. Would I do it again? Not entirely sure….

Edited to add, we generally needed three additional people to make the numbers work.

Tallblacktrees · 27/01/2025 23:09

TheDefiant · 27/01/2025 23:02

The agreement in principle amount would be a mortgage of around £800 pcm.

We've found something cheaper...

I'm convinced there's a catch and will have solicitor investigating.

Show quote history

Is it in a decent area?