Do student loans affect mortgages?
Ever wondered how student loans affect mortgages?
.
Drawing on years of experience, industry award-winning mortgage expert Ray Boulger - of mortgage broker John Charcol (www.charcolonline.co.uk) - answers your questions.
Natasha - from London asks:
When applying for a mortgage, do either of the two types of student loans impact the decision at all? The type of student loan post 1998 seems unlikely to affect a mortgage application as it is deducted via the income tax system, however pre 1998 loans are paid back in the same style as a mainstream loan via direct debit. Therefore, would a broker need to take this into consideration during the application process, or is this information not necessary?
If you are lucky enough to work for an employer who will deduct your payment via your PAYE they may seem tax free but they actually do calculate the monthly payments after tax and take the whole amount. If the lender works on 'income multiples' they will ask for your gross salary and any commitments that you have, in which case you should state the monthly payment that comes out of your income and this is detailed on your payslip. If the lender asks for your net income after tax because they are going to do an 'affordability' calculation, then use the figure on your payslip and just be careful not to then include the loan a second time when they ask for other monthly commitments later; you should enter £0.
If you have a question for Ray, go to www.myfinances.co.uk/askthemortgageexpert
For more information on the issues discussed here, go to www.charcolonline.co.uk or call 0800 358 5560.
Charcol Limited is authorised and regulated by the Financial Services Authority (FSA registration number 427339). The FSA does not regulate credit cards, personal loans or some investment mortgage contracts. Some Buy To Let mortgages are regulated by the Consumer Credit Act (CCA).
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