In this brief blog, we will cover PhD stipend mortgages and how you can use your PhD stipend income to get a mortgage.
If you are a PhD student then getting a mortgage with a stipend income can be hard as most mortgage lenders don’t accept stipend income but there are some mortgage lenders who will offer you a PhD stipend mortgage with your stipend income.
PhD stipend mortgage
A PhD stipend mortgage is not a particular type of mortgage but essentially a mortgage where the stipend income (also known as benevolence income) is taken into consideration when issuing a mortgage.
A stiped income is a regular payment made by an employer to cover the basic costs of living or training of an employee.
A PhD stipend income is, therefore, regular payments made to a PhD student to cover their basic costs of living such as food, utilities, transportation etc during their PhD studies.
Do mortgage lenders accept PhD stipend income?
Most mortgage lenders in the UK do not offer a PhD stipend mortgage as they do not accept stipend income as part of a borrowers income due to the fact they don’t class it as a reliable source of income. Some mortgage lenders do consider PhD stipend income whilst other mortgage lenders may consider a percentile of your PhD stipend income and offer you a PhD stipend mortgage on that basis.
What are the eligibility requirements of a PhD stipend mortgage?
When considering a PhD stipend mortgage, the mortgage lender will look into the below details to make up their mind on if you meet their requirements or not.
How long have you received PhD stipend income?
Most mortgage lenders will require that you have received your PhD stipend income for at least 4 months whilst others will require your PhD stipend income has a minimum term left in which you will continue to receive it.
Stipend income as a secondary income
Some mortgage lenders will only accept PhD stipend income if it is a secondary income whilst some mortgage lenders will accept it as the main income if you have a joint applicant getting a joint mortgage with you. There are also mortgage lenders that will accept your PhD stipend income as your main income and offer you a PhD stipend mortgage.
Your future career prospects
Most mortgage lenders will inquire about your future career prospects and how long you expect to get there. If you are doing a PhD for medicine which is ending in 6 months and you expect to become a doctor within 12 months then there may be more mortgage lenders willing to offer you a PhD stipend mortgage.
Your credit score
The mortgage lender will also consider your credit score and monthly disposable income to see if you will be able to afford the mortgage payments with your stipend income.
If you have bad credit then you may struggle to find a mortgage lender who is willing to lend to you under those circumstances and if they are willing to lend to you then you may be required to put down a larger mortgage deposit.
Can you get a PhD stipend mortgage?
Yes, you may be able to get a PhD stipend mortgage based on your circumstances but you will likely not find many high street mortgage lenders willing to lend to you but rather non-high street mortgage lenders may be more willing to lend to you due to their specialist nature.
As the PhD stipend income is paid for a limited period and there is no guarantee you will be offered a full-time job to replace the stipend income you may find it harder to get a PhD stipend mortgage if you don’t show the mortgage lender that you have real carer prospects and you are able to get a job at the university or elsewhere once your PhD studies are over.
You can do this by seeking job offers which are deferred.
Most mortgage lenders will look at your CV and look at your possible career paths to work out what your potential future income could be in a particular timeline and then decide how much they will lend to you based on that.
This means that depending on what your PhD studies are on you may be able to get a PhD stipend mortgage or not as your studies will be the main determining factor of what your future career path could be and how much you could potentially earn per year.
How much mortgage deposit do you need for a stipend mortgage?
A stipend mortgage can be obtained with as little as a 5% mortgage deposit but this will all be based around your personal circumstances and if you have bad credit or have other issues such as non-standard construction etc then you may find that you will need a substantial larger mortgage deposit.
You can always increase the mortgage deposit you need for your stipend mortgage by using a first-time buyer or home mover government scheme.
These first-time buyer government schemes can also reduce the total cost of the property purchase as well as increase your mortgage deposit in some instances.
Some of these first-time buyer schemes include:
- Lifetime ISA– gives you a government bonus of £1,000 if you save a maximum £4,000 a year.
- Help to buy ISA– gives a maximum bonus us £3,000 if you save the maximum allowed of £12,000. Before you get either you should consider which is better. Lifetime ISA vs Help to buy ISA.
- Help to buy equity loan– gives you up to 40% as a 5-year interest-free equity loan. You begin to pay interest at 1.75 % after the fifth year and 1% plus RPI for every year thereafter.
- Shared ownership– You can buy between 25% to 75% of the property initially with a shared ownership mortgage and then buy more using a staircasing mortgage.
- Armed forces help to buy– similar to the help to buy equity loan but specific for the armed forces personnel giving them an increased chance of acceptance.
- Rent to buy– This is the right to buy scheme on which this guide is currently discussing. A different marketing name is just used. Watch out for this when shopping to avoid missing out on eligible properties due to confusion.
- Right to buy– allows you to buy your home at a discount price.
- Preserved right to buy– same as above.
- Right to acquire– similar to the above.
Depending on where you live, you may also be able to take advantage of home buying schemes provided by your local council. Example: In Norwich, the local councils provide the Norwich home options scheme.
You may also be able to get 100% LTV mortgages by getting a family or friend to be your guarantor for a guarantor mortgage. This will mean you don’t have to pay any mortgage deposit.
Can you get a stipend mortgage with bad credit?
Getting a stipend mortgage with bad credit may be very difficult as it is already difficult enough to get a mortgage with bad credit.
Whether you can get a stipend mortgage with bad credit will depend heavily on your own personal circumstances hence what type of bad credit is it, how long ago was it? What was the reason you had bad credit? What was the total value?
There may be some mortgage lenders who are willing to offer you a PhD stipend mortgage but you may need a specialist mortgage broker to find these mortgage lenders.
You may also need to put down a larger mortgage deposit to get a PhD stipend mortgage with bad credit.
How much can you borrow on a PhD stipend mortgage?
The amount you can borrow on a PhD stipend mortgage will vary from one mortgage lender to another but generally most mortgage lenders will use an income multiple to let you know the maximum they may be able to lend to you but due to the complex nature of PhD stipend mortgages this may not be a true indication of your borrowing power.
Your borrowing power could also change significantly if you are getting a joint mortgage with someone who has a full-time job with a stable income.
Getting a PhD stipend mortgage as a sole applicant
If you are getting a PhD stipined mortgage as a sole applicant then you may find that most mortgage lenders will not offer you a mortgage and you may need a speclalist mortgage lender in order for you to get a mortgae offer.
In any case the most most Phd stipend mortgages will offer to a sole applicant is mortgage multple of 4 times your PhD stipend income. To find a higher income multiple you will need to have a great credit score and a larger mortgage deposit.
Getting a PhD stipend mortgage as a joint applicant
Getting a PhD stipend mortgage as a joint applicant will likely be easier as most mortgage lenders will prefer to lend to borrowers who have a joint applicant with a full-time job and stable income as this reduces the risk to the mortgage lender.
A joint mortgage may, therefore, be a good choice if you have a PhD stipend income.
Can you get a mortgage with a PhD stipend?
Yes, you can get a mortgage with a PhD stipend but you may need to have other sources of income which are more reliable or long term. You may also need to put a larger mortgage deposit down to increase your chances of getting a mortgage with a PhD stipend.
Does a PhD stipend count as income?
Yes, a PhD stipend can count as a supplementary income or your main income but in either case, the mortgage lenders available to you will be limited.
Can a graduate student get a mortgage?
Yes, a graduate student can get a mortgage. There are specific types of mortgages termed as graduate mortgages and this kind of mortgages may be more suited to you if you are a graduate.
Use a mortgage broker for your mortgage in principle
You may want to use an independent mortgage broker to help you get a mortgage on your new home.
Mortgage brokers are important as they can access mortgage products from across the whole of the market in some cases.
This could be over 11,000 mortgage products. This may have some advantages rather than going directly to a mortgage lender.
A mortgage broker will look to understand your financial circumstances and then provide recommendations on which mortgage products may be suitable for you based on your mortgage affordability.
After giving you these mortgage recommendations, most mortgage brokers will seek your consent to apply for a mortgage in principle.
This will allow you to shop for your home as more estate agents and sellers may take you seriously and it will also give you confidence that your mortgage is indeed a possibility before you make a full mortgage application.
Once you have found a home you want to buy and are satisfied with the mortgage offer for your mortgage then the mortgage broker will then look to get you a mortgage offer.
This will come with a key facts illustration document that details the features of your mortgage including how much you will pay per month.
It will also contain information on if there are any limits such as early repayment fees, or annual overpayment limits.
If you are happy with everything you can then go on to secure your mortgage with the help of a conveyancer.
Your conveyancer will manage the legal searches on the property to ensure there aren’t any issues with it.
They will oversee the sales agreement to ensure it is in your best interest, they will manage the transfer of mortgage funds, exchange contracts with the seller or their conveyancer, and set a completion date with the seller or their conveyancer.
This will then bring an end to the conveyancing process, at which point you will receive the keys to the house and move in.
If you need financial advice and you live in the UK then you could contact the Money Advice service over the phone or via chat for impartial advice.
You can also contact the debt charity “Step Change” if you are in debt and need help.