Student Buy to Let – 100% mortgages available to students!

Student Buy to Let – 100% mortgages available to students!

12:46 PM, 16th November 2012, About 9 years ago 22

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Seriously, this is NOT a wind up! Our regulated mortgage broker of choice has informed us of a deal that he’s done with a lender which allows students to invest into a buy to let property worth up to £250,000 with NO DEPOSIT. What’s more, the lender is offering a 0.25% discount off their standard variable rate for the first two years. 

I can assure you this is absolutely genuine, both myself and my business Partner Neil Patterson have double checked this with the mortgage lender directly. They are a very credible and established mortgage lender too.

Obviously there is criteria involved, the key principles of which I have outlined below.

Who can apply for this mortgage? 

The mortgage is available to students in Higher Education throughout England and Wales. An application can be made in the sole name of the student, or jointly between the student and their parents. In the case of a sole application, the lender will require a parental guarantee.

Maximum loan

Up to 100% of the value of the property, subject to a maximum £250,000. The actual amount you can borrow will depend on the income that will be received from letting rooms within the property. Where this is insufficient rental to support the mortgage, the lender will consider parental income after deductions for financial commitments.

What Security is required?

The lender will require a first charge over the property to be purchased. Additionally, on loans greater than 80% of the value of the property, the lender will also require a collateral charge over the residential property of the parents.

Why would students want to become landlords?

We expect these mortgages to be very popular with students who want to buy a two or three bed flat or house to live in and rent out the spare room to their friends. There are massive tax breaks involved in this too as rent collected for renting out rooms in your own home is tax free for the first £4,250 a year regardless of any other income or tax allowances.

What sort of property is acceptable?

The property must be in England or Wales and must be located within a 10 mile radius of the university attended. The property must have no more than four bedrooms. There are specific properties the lender will not consider, such as ex local authority flats, or flats in blocks of more than 6 storeys.

Other criteria

The lender will allow no more than 4 occupiers, to include the mortgage holder. Tenancies must be granted under a Licence Agreement. The other tenants do not have to be students.

The lender recognises that the student letting market operates within specific time frames; students are often looking to secure accommodation in January or February for occupation at the start of the academic year in October. This may require a property to be bought in January or February in order to market it to sharers for the following academic year. With this in mind the lender will allow the property to be let under an Assured Shorthold Tenancy for a minimum period of 6 months provided it is then occupied by the student as their main residence by 1st October at the start of the next academic year.

For obvious reasons, our recommended mortgage broker does not want us to disclose the details of this lender. He expects to be flooded with applications but also doesn’t want other brokers to get in on this as the lender may withdraw from the market once they have hit their targets.

Therefore, if you are seriously interested in finding out more, please complete the form below and we will pass on your details to our recommended broker so that he can make contact with you. When you submit the form we will link you through to our recommended mortgage brokers profile page on his website.

Also see our article on on how to find good lodgers.



Comments

by Pradeep Jerome

19:12 PM, 30th August 2014, About 7 years ago

What is a realistic time scale? If the student and lodgers are ready to move in? And all that is required is a property.

by Howard Reuben CeMap CeRER

10:16 AM, 20th June 2016, About 5 years ago

UPDATE - THE ORIGINAL PRODUCT IS NO LONGER AVAILABLE VIA PROPERTY118. There is, however a new product now available via another small BS instead, as follows;

"Who can apply for this mortgage?

A Buy for Uni mortgage is available to students in higher education where the property being purchased is located in Wales, Birmingham or southern England but excluding areas located inside the M25.

Mortgage applications can either be in the name of the parent and student or the student on their own. In the case of an application being in the sole name of the student, a parental guarantee is required. Applicants must be a minimum age of 18 years old.

What is the maximum amount I can borrow?

We will lend you up to 75% of the property’s value, subject to a maximum loan amount of £400,000 (minimum: £40,000). The actual amount you can borrow will depend on the rental income you receive from letting rooms within the property. Parental income can be considered where there is a shortfall on rent.

A combination of rent and parental income can also be considered. Rent must be at least 25% more than the mortgage interest repayments. Parental income can be used to cover any shortfall in rental cover

Loans are available on an interest only or repayment basis.

Will you lend up to 100% LTV?

No but we will consider lending parents the 25% deposit required by way of a mortgage against their property subject to them meeting the Society’s underwriting and affordability criteria.

(In essence, if the numbers stack up, that's the full 100% purchase price raised via two different securities).

What security is required?

A first legal charge* over the property being purchased and a first charge over the residential property of the parents where we are lending the deposit.

(note - as above)

* A legal charge used to secure the main mortgage. A lender with a first legal charge over a property has first call on any funds available from the sale of the property.

What type of property will you lend on?

Firstly, the property must be located in Wales, Birmingham or southern England but not inside the M25.

Secondly it must also be located within 10 miles of the university/higher education college attended.

The maximum number of bedrooms is four.

Properties not considered acceptable are: flats, ex local authority houses, houses of non-traditional construction or properties with more than three storeys.

Do all the occupiers of the property have to be students?

No, the property can be let to tenants other than students. Tenancies must be granted on an Assured Shorthold Tenancy agreement of a minimum of 6 months, maximum 12 months, with no more than four occupants to include the mortgage holder (student).

Flexibility will be allowed where a property is being purchased before March / April when the academic year commences in September/October. During this period the whole of the property may be let without the student being in occupation, but when the academic year commences the student must occupy it as their main residence."

The previous scheme was so popular the building society has had to rein in the distribution so that they could control funds.

The new scheme is a welcome addition to the 'BTL' range of products.


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