Student loan repayments are considered in lenders affordability calculations in a similar way to any other personal loan or finance you may have. The repayments made to the loan are treated as committed expenditures when lenders calculate the amount you can borrow.
The way student loans are repaid differs from regular credit commitments in the following ways:
- There is a threshold of income before you start making repayments. Depending on the student loan plan you have, repayments start once you are earning around £21,000 per year at the time of writing.
- Your repayments are based on your annual income so the less you earn the smaller the commitment will be. This incremental repayment calculation is helpful when making mortgage affordability calculations as you should never have a repayment that could be deemed too high for your income, which should in turn mean the repayments have only a small effect on your borrowing.
- Your monthly repayments will show on your monthly or weekly payslips if you are employed and only on your annual tax calculations if you are self-employed.
- Your student loan will not show up in a lenders credit search, so no matter how large your student debt is, it will never be counted in lenders “debt to income” ratios.
Having a student loan is unlikely to cause any significant issues when applying for a mortgage provided you declare this to your broker or lender prior to obtaining a decision in principle. You must do this to avoid your lending amount being reduced after you have made a full mortgage application.
Whether you are employed or self-employed our specialist mortgage advisors have many years of experience dealing with applicants who have student debt and can help guide you through the process in a professional and competent manner.