Does a Student Loan Affect a Mortgage?

Taking out a mortgage while still repaying a student loan is a common concern for first-time buyers in the UK. While having a student loan does not stop you from getting a mortgage, it can affect how much you are allowed to borrow. Lenders assess affordability based on your income and financial commitments, which includes monthly student loan repayments.

This guide explains how student loans impact mortgage applications, borrowing limits, lender requirements, whether you should declare your loan, and the role of brokers in securing a mortgage.

Does a Student Loan Impact Mortgage Applications?

Student loans do not appear on your credit report or affect your credit score. However, lenders assess affordability based on how much disposable income you have after regular financial commitments, including student loan repayments.

When applying for a mortgage, lenders will consider:

• Your income (salary, bonuses, or self-employed earnings).

• Your monthly outgoings, including rent, bills, and debts.

• Your student loan repayments, if applicable.

• Your credit score and history of repayments.

If your monthly student loan deductions are high, it reduces the amount of disposable income you have, which may lower the amount you can borrow.

How Might a Student Loan Impact What You Can Borrow?

Lenders use affordability checks to determine how much they will lend you. A student loan reduces your net income, meaning lenders may offer you a lower mortgage amount than someone with the same salary but no student debt.

For example, if you earn £30,000 per year, your student loan repayments under Plan 2 (post-2012 loans) would be £67 per month. While this may seem small, mortgage lenders consider all outgoing expenses when calculating affordability.

If your repayments are higher, lenders may reduce the amount they are willing to lend, as they see your disposable income as lower.

Should You Declare Your Student Loan on a Mortgage Application?

You should always declare your student loan when applying for a mortgage. While it does not appear on your credit report, mortgage lenders check your income and deductions, including student loan repayments.

Failing to disclose a student loan could be considered mortgage fraud, as lenders need accurate financial information to assess affordability.

How a Mortgage Broker Can Help

If you are worried about how your student loan will affect your mortgage, working with a mortgage broker can be beneficial. A broker can:

• Find lenders who assess student loans differently.

• Compare lenders to get the highest mortgage offer possible.

• Help with affordability calculations to understand how much you can borrow.

Mortgage brokers have access to a wider range of lenders, including those who take a more flexible approach to student loans.

Student Loan Defaults and Mortgage Applications

If you miss student loan repayments, this does not impact your credit score as student loans do not appear on your credit file. However, if you default on other debts, such as credit cards or personal loans, this can significantly reduce your chances of being approved for a mortgage.

If you are struggling with repayments, contact Student Loans Company (SLC) to discuss repayment options rather than missing payments.

Final Thoughts

A student loan does not prevent you from getting a mortgage, but it can reduce the amount you can borrow. Lenders factor in student loan repayments when calculating affordability, so your disposable income will determine how much you can secure.

Declaring your student loan is essential, and if you are unsure about your borrowing potential, consulting a mortgage broker can help you find the best lender for your circumstances. If you have a high student loan repayment but still want to get on the property ladder, looking at ways to reduce other debts and improve your credit profile can improve your chances.