Graduate mortgages

As Britain’s economy grows, inflation increases and house prices continue to rise making it ever more difficult for graduates to make their first steps onto the property ladder. With the added concern of choosing a career and paying back student loans, this can be a daunting time for graduates looking to buy their first property. Fortunately, help has arrived in the form of the graduate mortgage.

Graduate mortgages are a relatively new product developed in reaction to rising house prices and an increase in the number of students attending universities in the UK. Mortgage lenders have recognised a call from graduate first time buyers endeavouring to gain access to the property ladder and have responded by introducing graduate mortgages as a way to answer this demand. Although it may be some time before we see all mortgage lenders setting up products of this nature, graduate mortgages are becoming progressively more evident within the UK mortgage market.

Graduate mortgages are based on the potential earnings of graduates and provide financial assistance for graduate borrowers looking to buy their first property. Typified by a low set up fee, good income multiples and flexible features, graduate mortgages provide a path to the property market for graduates who are unable to raise sufficient funds on their current salary.

One distinctive feature of the graduate mortgage is a high loan to value (LTV) attached to the product. Mortgage lenders are willing to lend 100% of the property’s purchase price and more often than not, most graduate products come with an extra 2% added to the loan. This additional 2% enables graduate borrowers to settle into life on the property ladder and pay for any further fees that may arise during purchasing, such as stamp duty and legal fees. Some mortgage lenders even provide up to 125% LTV but this involves introducing a guarantor on to the mortgage. Furthermore, interest rates are often capped for the first year of the graduate mortgage allowing borrowers to become accustomed to paying fees on a regular basis.

To be accepted for a graduate mortgage, applicants must be first time buyers over the age of 21, educated to degree standard from a recognised UK university within the last 7 years and able to provide a degree certificate to prove this. Applicants must have been employed for a minimum of 12 months with any probation period passed.

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