A twist to the usual narrative about how hard it is to be a student these days (£9000 a year fees, student loans, massive debts) and even harder to get a foot on the property ladder for young people (huge deposit requirements, impossibility of saving, rising rents) has come to our attention.
Whilst most students are scrabbling down the back of the sofa for a couple of quid to buy a kebab, there is a new opportunity for the canny and organised ones amongst their numbers to kill a few birds with one stone, with zero outlay. Those birds include solving their current housing dilemma at the same time as becoming a homeowner.
A new scheme announced by Property118.com, a popular community for landlords and property professionals, gives students the option to invest in their own student house. The deal involves offering a mortgage of up to 100% on a property up to £250 000 in value, with no deposit necessary. On loans above 80% LTV, a collateral charge on the student’s parental home will be required by the lender.
We could see students buying their own two or three bed flat or house, and renting out the spare rooms to their fellow students. They’d become live in landlords, and so may also benefit from tax free rent collection up to the amount of £4250 a year, under the Rent a Room scheme.
Interested students and their parents should inform themselves fully of the possible implications of investing in a student property before committing. Studying away from home is a short term commitment, as opposed to a twenty-five year mortgage, and students need to think carefully about what happens once they finish their studies.
For more information visit Property118.com.
When I was first told that students could get 100% mortgages the first two things that crossed my mind were:-
1) It must be a wind up!
2) The lenders must be crazy.
I checked it out though and it’s not a wind up and neither is it irresponsible lending.
The key to this is parental guarantees. The lending decision is based on the parents ability to underwrite the risk and to provide a charge over their home which must have equity in it.
Therefore, it’s only students with parents who have a lot of equity in their home, low commitments and surplus incomes that will qualify for these mortgages. However, students who don’t qualify will not necessarily miss out as their rich mates may well be buying really cool properties and renting rooms to them.
As I see it, everybody is a winner.
Some students will get a foot on the housing ladder and rent to offset their bills whereas others will have more choice over where they live.
Regards,
Mark Alexander
Property118.com
This does seem like a good scheme even though it will certainly benefit students from better off families.
However, as suggested in your last paragraph, the students and their families will need to know what they’re getting themselves into in terms of landlord responsibilities. Organising electrical checks, boiler checks, and making sure there are sufficient smoke alarms and carbon monoxide alarms are a few of the safety issues that spring to mind, let alone carrying out general maintenance and repair jobs – which let’s face it, in a student house, can be a little above average!
All that said, if you’re prepared to take on the responsibility, it does seem like a great way of avoiding the student debt nightmare, and if you buy well, who knows, you could even make a decent profit over the duration of your course.
I hope to be reading about a few success stories from this scheme in a few years time.
What a great idea. I know of at least 1 property tycoon who did exactly this in the 1990′s. He bought his first house and occupied one of the bedrooms; he then let the rest of the rooms to his mates. He has never looked back since. With companies such as spareroom allowing you to have free advertisements, it’s a great opportunity to be given serious consideration.
Michael