Introduction to Graduate Mortgages
Most graduates leave higher education with sizeable debts, so few are in the fortunate position of being able to put down a deposit on a property and buy using a mainstream first time buyer’s mortgage. According to Lloyds TSB, 22 percent of students expect to live with their parents after graduation, largely because they cannot afford to purchase their own property.
As UK property prices are unlikely to fall, this situation will probably continue for the foreseeable future. With this in mind, many high street banks and lenders are tapping into this large market and offering favourable mortgage rates and terms to recent graduates, in order to encourage more people to step on to the property ladder.
Graduate Mortgages - The Basics
As the name suggests, graduate mortgages are mortgages that are aimed at individuals who have recently graduated and have a university degree. The theory, from the lender's point of view is that graduates, whilst they often have very little cash in the way of savings, nevertheless have a solid and good future income stream. This means that they are a good risk as they are likely to be able to make the repayments in the future. It also gives the lender a lead in to the individual graduate and the possibility of cross-selling additional products such as credit cards, bank accounts and savings products.
Eligibility for a Graduate Mortgage
It makes sense that in order to obtain a graduate mortgage, it will be necessary to prove that you are indeed a graduate. Normally, this will require a full degree (i.e. not an HND or HNC) from a university and one that has been awarded within the last 7 years.
Some graduate mortgage providers will only allow borrowers to have one graduate mortgage. Therefore, if you graduated within the last 7 years but are a second time purchaser you would not be eligible. If you are in this sort of situation, it is worth shopping around to find out which providers will assist you with a graduate mortgage.
Another issue which may affect eligibility is if you are looking for a joint mortgage with a non-graduate. This does not normally cause much difficulty and many lenders will offer a graduate mortgage to couples where one is not a graduate; simply ask a variety of lenders to find out which one is the most suitable for your needs.
Graduates are often in a position of not being able to afford a mortgage without considerable assistance;
despite the lack of credit history many graduates have a healthy financial future and make good lending risks for banks;
many lenders are now offering favourable terms to graduates, based on certain eligibility criteria.