Using student loan for mortgage

[TheDefiant]

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?

Agreed. My DS had a living room in every single house he was in - also an engineering student. Vital in lockdown when they sat in the living room and watched lectures together. Mine would not have gone into a house with only a small kitchen and no shared living space.

Agree, dd's group would only consider flats with a lounge. Some have open plan kitchen with dining space and sofa.

How can a student be on a standard mortgage? The only income is the rent. No job. He may well get a decent job but few engineers get a very top salary very quickly because they are not fully qualified. It takes several years post degree. Obviously there are other careers available with an engineering degree but ultra competitive. As DH’s company has one of their engineering consultancy offices in Glasgow, it’s not riches all the way.

How would you rent out two bedrooms even if he didn't live there? It would not be your place to rent out.

i stayed in many a student house over the years and all of them had living rooms. Neither I, nor anyone I knew, would have stayed somewhere without one.

Get your DS on the property laddder ASAP, he will thank you later!

Hence the JBSP Mortgage the OP is talking about. I have family who have done this, it worked out well for them and i would certainly consider it for my kids too as long as i had the means to cover the potential downfalls, which the OP seems to have considered too.

@Outnumbered99 The student has no income! It’s a moot point if rental income is sufficiently robust for this. We just raised a mortgage on our house for DD. She paid us but was working. She was self employed though so had to have 3 years of accounts to get her own mortgage. Which she did after 3 years and we ceased our loan. No rental income needed.

That is why they need the parent on the mortgage, the "joint borrower" aspect is the father.

You can also get a mortgage with one years accounts if self employed- not necessarily as good as if you have three obviously but it can be done (in case anyone is reading this in this position!)

It’s almost impossible to get a standard mortgage with just one year. It’s also probably foolish as income tends to go up with more experience. It also provides far more certainty about actual earning capacity to wait a bit. However still would not have done this based on rental income and no job at all as DS is a student.

I mean we've got a decision in principle with an amount we can borrow and an interest rate. We've got the deposit and other funds for legal fees.

We've never stretched ourselves to our limit so that when the time came we could do this.

We have a choice of lenders too. I think there's 5 we could go to and they have all been briefed that son doesn't currently have a job and will be taking in lodgers.

The broker was very confident. (London and Country)

Son has almost £10,000 saved up. He's risking a lot too. It's taken 18 years and family deaths to get to that figure though.

I don't think it's a crazy idea. Not sure why you are only charging half rent though- sensible to offer good value but half the market rate is crackers.

Think about including bills in the rent- much easier to administer.

Are you imagining he'll stay there post uni?

Do you have enough slack so that if someone leaves unexpectedly/defaults/etc you can cover the mortgage without getting into trouble?

Are you on top of your legal obligations re safety etc?

"lots of us have done the maths and looked at it in detail. We couldn’t currently make it worth our while even being cash buyers. Not when you factor in downtime, repairs, agents fees hassle factor, new environmental/eco requirements coming in etc"

You're talking theory I'm talking from lived experience as a tenant and landlord.

In that city demand is vvvv high. There will be no downtime. Students expect 52 weeks of rent payments. There may even be special events TS for which landlords kick out students and let on Ab&b for hundreds a night.

Repairs? Have you seen student flats? If ds is living there he can do some diy. Good learning for him.

It's a very kettle of fish from being a non resident landlord.

Same with agent fees. You wouldn't have an agent when living in.

Yes there is some hassle but you need to see it as very well paid work if you work out the hourly rate!

If the house is in his name, then it’s up to him if he sells or not! You’re signing away your rights to do anything with the house.

Excellent. All potential problems solved then! The OP is buying a super cheap but very large bargain of a flat in the centre of edinburgh with no down time (even though OP herself has said it would be 10 months of rental income), no advertising required, students prepared to live without communal space, no tax issues and no repairs or work required. Plus the OP is happy to take the risk and gift the deposit/stay on a mortgage (potentially forever) effectively guaranteeing the payments (which is great until a third party girlfriend/boyfriend etc gets involved..).

The reality is that whilst many of us will make gifts/guarantee payments for our DC, the OPs DS is not a qualified electrician/plumber/heating certified engineer, there are legal/safety standards to uphold etc etc

I do have experience as a landlord by the way.

My partners parents did something similar when he was a student. It worked well, him and a friend lived there for their degree, then they let it out to other students for a few years before selling (his parents owned the property). Just make sure you have some cash aside for big emergancy repairs like broken boilers, roof repairs etc that your son might struggle to cover up front.

My other advice would be to get him to take the loan! Unless you can be sure he won't need to take out any form of finance when he finishes uni (e.g. car loan, home improvements etc), take the loan! The scottish student loan is one of the best interest and safest ones you'll ever be offered. Low interest and he only pays it back when he's earning a decent amount, and it wont affect his credit score and its not a huge amount. If he doesn't need it for living just now, get him to put it into a high interest savings account for the future.

I agree with this. He has already taken a loan this year so it is pointless trying to avoid loans for future years as it won't make a difference to how much he has to pay monthly while working