Stipend Mortgages

Stipend mortgage broker and advisor

What is stipend?

A stipend is a form of income provided to individuals instead of a traditional salary. It is commonly given to various groups of workers, including PhD students, clergy members, and charity workers, among others. The purpose of a stipend is to cover essential expenses that individuals in these positions typically encounter, such as food, transportation, phone bills, and rent.

Can stipend income be used to qualify for a mortgage?

While it is possible for a stipend to be considered for mortgage affordability, not many lenders accommodate this specific income source.

However, there are lenders who do understand the unique circumstances of those receiving stipends and are willing to work with them. It may require some research and effort to find these lenders, but they do exist.

Why don’t most lenders accept stipend?

Most lenders may be hesitant to accept stipends as a form of income for mortgage affordability due to several reasons. Firstly, mortgages are typically long-term commitments that span several decades, while stipends are often provided for a limited duration, such as the duration of a PhD program.

Lenders prefer stable and consistent sources of income to ensure the borrower’s ability to make mortgage payments over an extended period.

Secondly, although studying for a PhD can enhance job prospects, it does not guarantee immediate employment or a specific income level upon completion. Lenders prioritise borrowers with established and reliable income streams that demonstrate their ability to meet mortgage obligations consistently.

Do I need to apply with someone else?

No, it’s possible to apply on your own.

However, In some cases, it might be beneficial to apply for a mortgage with a co-borrower if you are relying on a stipend as your primary source of income. Applying with a co-borrower can strengthen your application by combining both of your incomes and improving the overall affordability assessment.

A co-borrower can be a spouse, partner, family member, or someone who is willing to take joint responsibility for the mortgage. Ideally, the co-borrower should have a stable and verifiable source of income to supplement your stipend.

How much can I borrow?

When using stipend income for a mortgage, the income multiples offered by lenders are typically the same as for any other type of mortgage. However, it’s important to note that you may have fewer lender options available due to the unique nature of stipend income.

Lenders generally offer income multiples of around 4-5 times the income, although in some cases, it could be higher. It’s worth mentioning that certain lenders may consider the entirety of your stipend income for affordability calculations, while others may only consider a percentage, such as 50% or 60%.

The specific approach taken by lenders regarding stipend income can vary, so it’s advisable to explore different lenders and their policies to find the most suitable option for your circumstances.

Which lenders accept stipend Income? | Best stipend mortgage lenders

There are a few mainstream lenders that consider stipend income for mortgage applications. For example, NatWest and Halifax are known to accept stipend income, but it’s important to note that their specific criteria may vary.

Halifax, for instance, typically accepts stipend income if it is received from the clergy. On the other hand, smaller building societies like Teachers Building Society, Newbury Building Society, and Melton Mowbray Building Society may consider stipend income, although some of them may only take a portion of it into account for affordability assessments.

Can I use stipend Income as well as income from a job?

Yes, it is generally possible to use income from another job in addition to your stipend when applying for a mortgage. In fact, most lenders require borrowers to have a second income alongside their stipend. Relying solely on a stipend income may limit your borrowing capacity, so having an additional source of income can strengthen your mortgage application.

Lenders typically prefer to see consistency in both your work and study commitments. They may ask for a minimum employment history of around six months to ensure that you are capable of managing both responsibilities effectively in the long term.

What are the rates for Stipend Mortgages?

Generally, the rates and products available for stipend mortgages are similar to those for applicants with regular income.

However, it is important to note that the range of lenders and options may be more restricted for stipend income borrowers.

While there may not be specific mortgage products exclusively designed for stipend income, lenders typically apply their existing mortgage products to borrowers with stipend income. This means that the terms, rates, and conditions will be similar to those offered to those with regular income.

What size deposit is needed for a stipend mortgage?

When applying for a mortgage with a stipend income, the required deposit size can vary depending on the lender and their specific policies. In general, it is possible to secure a stipend mortgage with a deposit as low as 5% of the property’s purchase price.

However, it’s important to note that having a larger deposit can be beneficial as it reduces the loan-to-value (LTV) ratio and may provide access to more favorable interest rates and mortgage options.

Do I need to receive stipend monthly to get a mortgage?

No, there are lenders who accept stipend income, even if it is paid on a quarterly basis rather than monthly. While some lenders may prefer monthly income for easier assessment, there are lenders who understand the unique payment schedule of stipend income and are willing to consider it.

How long do you need to have been receiving stipend to apply for a mortgage?

In general, most lenders require you to have received your first stipend payment before they consider your stipend income for a mortgage application. Once you have received your initial stipend payment, you can begin exploring mortgage options with lenders.

However, it’s important to note that lenders often prioritise the remaining duration of your stipend income rather than the length of time you have been receiving it. They want to ensure that your stipend income will continue for a sufficient period to support the mortgage repayments.

While specific requirements may vary among lenders, some may require you to have more than 12 months of stipend income remaining before they consider your application.

Does having a student loan affect how much I can borrow?

Potentially, but usually only if you are currently paying off a student loan. Mortgage lenders will consider this as a financial commitment, and it may impact the amount you can borrow. Lenders typically take into account the monthly payment you are making towards your student loan rather than the outstanding balance.

The student loan payment is considered as part of your overall financial obligations and is factored into the calculation of your debt-to-income ratio. This ratio helps lenders determine your ability to afford mortgage payments alongside your other financial commitments.

However, if you have a good level of surplus income after accounting for your mortgage payments and other necessary outgoings, the impact of the student loan on your borrowing capacity may be minimal.

Do non-British citizens qualify for a mortgage while doing a PhD?

Yes, non-British citizens can qualify for a mortgage while pursuing a PhD in the UK. However, there are additional criteria and factors to consider in such cases.

Lenders may take into account factors such as your immigration status, the length of time you have been in the UK, and the remaining validity of your visa. These factors can affect your eligibility for a mortgage and the specific requirements set by lenders.

Some lenders may require a minimum period of time in the UK or a certain duration remaining on your visa before considering your mortgage application. This is to ensure that you have a stable and secure residency status.

Additionally, larger deposits may be requested by lenders for non-British citizens.

Can I get a joint mortgage with stipend income?

Yes, It is indeed possible to get a mortgage with joint stipend income. There are a few options available:

• One Person’s Stipend Income: One person can use their stipend income to apply for the mortgage, and the income of another individual can be used to supplement it. This can help increase the borrowing capacity and improve affordability.
• Both Parties’ Stipend Income: Alternatively, if both individuals are receiving stipends, their combined incomes can be considered for the mortgage application. Lenders may assess the total stipend income of both applicants to determine affordability.

What alternatives are there if you can’t borrow enough?

If you are unable to secure a mortgage with stipend income alone, there are several alternatives to consider:

• Joint Mortgage: You can apply for a joint mortgage with a partner or someone else who has a stable income. Combining your stipend income with their income may improve your borrowing capacity and increase your chances of mortgage approval.
• Joint Borrower, Sole Proprietor: This option allows you to include another person as a joint borrower on the mortgage application while retaining sole ownership of the property. The joint borrower’s income can be considered, potentially increasing your chances of obtaining a mortgage.
• Gifted Deposit: If you have a family member or friend willing to gift you a portion of the deposit, it can increase your deposit size and potentially make you eligible for a wider range of mortgage options.
• Guarantor Mortgage: A guarantor mortgage involves having a family member or trusted individual guarantee the loan, providing additional security to the lender. The guarantor’s income and assets are taken into account, which can improve your chances of getting a mortgage.
• Wait and Save: You may choose to wait until you have saved a larger deposit or until you have completed your studies and have a stable income from employment. This can increase your options and potentially qualify you for better mortgage terms.
• Additional Income: If possible, you can explore options to generate additional income alongside your stipend. This can include part-time work, freelance projects, or other sources of income that can strengthen your mortgage application.

Can I get a buy to let mortgage as a student?

Yes, it is possible to get a buy-to-let mortgage as a student, although it may require a minimum income of £25,000 and, in some cases, current previous property ownership is required.

Is it a good idea to get a mortgage using stipend Income?

Buying a home with a stipend income can have both advantages and disadvantages, and the decision ultimately depends on your personal circumstances and goals. Here are some additional factors to consider:

• Income Stability: Evaluate the stability of your stipend income after completing your studies. Consider the likelihood of securing a job immediately or any potential gaps in income. If your income may be uncertain or insufficient to cover mortgage payments after graduation.
• Flexibility and Mobility: Owning a home ties you down to a specific location, making it more difficult to relocate or pursue opportunities in different areas. If you anticipate the need or desire to move after completing your studies, renting may provide more flexibility and freedom.
• Mortgage Options: Assess your borrowing capacity and eligibility for a mortgage. Waiting until you finish your studies and secure stable employment may allow you to qualify for a larger mortgage, potentially providing you with more options and a better home-buying experience.
• Lifestyle and Priorities: Consider your lifestyle preferences and priorities. If you value the stability and independence of homeownership, are committed to staying in the area for a significant period, and have a clear understanding of the financial implications, buying a home with a stipend income could be a viable option.

What documents do I need?

When applying for a stipend mortgage, you typically need to provide the following documents:

• Confirmation of Stipend: A letter from your university or doctoral center confirming your enrolment dates, stipend amount, and duration of the stipend. This letter serves as proof of your stipend income.
• Bank Statements: Typically, you will need to provide bank statements for the past three months to verify your financial transactions and demonstrate your ability to manage your finances.
• Identification and Proof of Address: You will need to provide identification documents, such as a passport or driver’s license, to verify your identity. Additionally, proof of address, such as a utility bill or bank statement, may be required.
• Proof of Deposit: If you are making a deposit towards the property purchase, you will need to provide evidence of the source of the funds, such as bank statements showing the accumulation of the deposit amount.
• Payslips (if applicable): If you have additional income from another job or source, you may need to provide payslips or income statements as proof of that additional income.

It’s important to note that specific document requirements may vary among lenders.

How to improve your chances of success with your application

To improve your chances of getting a stipend mortgage, consider the following strategies:

• Use a Mortgage Broker: Work with a mortgage broker who specialises in helping individuals with non-traditional income sources, such as stipends. They have experience navigating the complexities of such applications and can connect you with lenders who are more likely to consider your situation.
• Prepare Your Documents: Have all the necessary documents ready, such as confirmation of your stipend, bank statements, identification, proof of address, and proof of deposit. Organising your paperwork in advance can streamline the application process.
• Larger Deposit: Providing a larger deposit can increase your chances of approval. A larger deposit reduces the loan-to-value ratio, which makes the mortgage less risky for lenders. It may also give you access to a wider range of mortgage options and potentially better interest rates.
• Employment History: If you have additional earned income, it can strengthen your application. Having a stable employment history of at least six months can demonstrate your ability to manage both your studies and employment. Lenders typically prefer to see consistency and stability in income sources.
• Remaining Stipend Income: Lenders may consider the remaining duration of your stipend income. If you have at least 12 months left on your stipend, it can provide reassurance to lenders regarding your ability to meet mortgage payments.
• Maintain a Good Credit Score: A good credit score is important when applying for any type of mortgage. Pay your bills on time, keep credit card balances low, and avoid any negative credit activity. A higher credit score increases your chances of mortgage approval and can lead to more favourable terms.

Remember that each lender has its own criteria and policies, so it’s advisable to consult with a mortgage broker or specialist who can assess your specific situation and guide you through the process.

Can PhD students get mortgages?

Yes, PhD students can definitely get mortgages. However, it’s important to note that not all lenders may consider certain types of income, such as stipends or research grants, that are common for PhD students. Some lenders may have specific requirements or prefer applicants to have a main income source in addition to their stipend.

Can I get a mortgage on a stipend as a first time buyer?

Yes, it is possible to get a mortgage on a stipend as a first-time buyer. Mortgage options are available to various types of borrowers, including first-time buyers, home movers, those looking to remortgage, and even individuals interested in buy-to-let properties.

Can you buy a house on a PhD stipend?

Yes, it is possible to buy a house on a PhD stipend. While not all mortgage lenders accept stipend income, there are some lenders who do consider it as a valid source of income for mortgage applications.

Can I get a stipend mortgage with bad credit?

Getting a stipend mortgage with bad credit can be challenging, as lenders typically consider credit history when assessing mortgage applications. Bad credit may limit your options and make it more difficult to qualify. However, there are specialist lenders who may be more flexible and consider applicants with bad credit.

Can clergy members get stipend mortgages?

Yes, members of the clergy receiving a stipend can be eligible for mortgages. While not all lenders may consider stipend income from clergy members, there are some lenders, including Halifax, who do offer mortgage options for individuals in this profession

Halifax stipend mortgages

Halifax criteria

Stipend income is only acceptable for members of the Clergy. We will treat the income as basic annual income and require letter of confirmation from Religious order to verify stipend income.

NatWest stipend criteria

We can consider stipend income where the long-term nature of the income can be evidenced. Please discuss this with your BDM.

What is a student mortgage guarantor?

A guarantor is usually a parent or close relative who provides additional security for your student mortgage by using their savings or property as collateral. They sign a formal agreement stating that they will make the mortgage payments if you are unable to do so. In the event that neither you nor your guarantor can fulfill the payment obligations, the mortgage provider has the authority to repossess your guarantor’s property to cover the outstanding payments on your behalf.

Does my field of study affect my mortgage options?

No, the field of study for your PhD does not typically have a direct impact on your mortgage options. Mortgage lenders primarily focus on factors such as your income, employment stability, credit history, and ability to make repayments. The specific subject or field of study for your PhD is not typically considered as a determining factor in the mortgage approval process.

I am currently an undergraduate and not receiving a bursary or stipend, can I get a mortgage based on my student loan?

In short, it is unlikely that you can qualify for a mortgage on your own with just a stipend income.
However, there is a possibility of getting a mortgage with the assistance of someone who has a regular income. One option to explore is a Joint Borrower, Sole Proprietor arrangement, which involves adding a parent or another individual to your mortgage. By including their income, you may be able to increase the amount you can borrow.

Will my mortgage be more expensive due to receiving stipend income?

Receiving a stipend income does not necessarily mean that your mortgage will be more expensive. The same mortgage products are generally available, but the limited number of lenders who accept stipend income may result in fewer options and potentially higher interest rates.

What is the process?

The process for applying for a stipend mortgage typically involves the following steps:

1. Consultation with a Mortgage Broker: Start by seeking advice from a mortgage broker who specialises in stipend mortgages. They will assess your financial situation, discuss your needs and preferences, and guide you through the process.
2. Gather Documentation: Prepare the necessary documents, including proof of stipend income (such as a letter from your university or doctoral center), bank statements, identification, proof of address, and any additional income documentation if applicable.
3. Review Mortgage Options: With the help of your broker, review the available mortgage options suitable for your circumstances. They will consider factors such as your income, deposit size, credit history, and repayment capacity to determine the most suitable mortgage products.
4. Obtain Agreement in Principle (AIP): Once you have identified a potential lender, your broker can help you secure an Agreement in Principle (AIP). This is a conditional offer from the lender indicating the amount they are willing to lend you, based on an initial assessment.
5. Property Search: Begin your property search based on the AIP and your budget. Take into consideration your stipend income, deposit amount, and the criteria set by your potential lenders.
6. Full Mortgage Application: Once you find a property, work with your broker to complete the full mortgage application. Provide all the necessary documentation and information requested by the lender. Your broker can assist you in ensuring that the application is accurate and complete.

How can Strive Mortgages help?

A mortgage broker can provide valuable assistance when it comes to securing a stipend mortgage. Here’s how a broker can help:

Access to Specialist Lenders: Mortgage brokers have access to a wide network of lenders, including those who specialise in mortgages for individuals with stipend income. They can identify lenders who are more likely to consider your specific situation and have experience working with borrowers in similar circumstances.

Market Knowledge and Expertise: Brokers stay up-to-date with the latest mortgage products, rates, and lending criteria. They can leverage their expertise to guide you through the process, explain different mortgage options, and help you understand the implications of each choice

Application Assistance: Brokers can assist with the mortgage application process, ensuring that all required documents and paperwork are properly prepared. They can help you present your stipend income in the most favourable light, maximising your chances of mortgage approval.

Negotiation and Comparison: Brokers can negotiate with lenders on your behalf to secure competitive rates and terms. They can compare offers from multiple lenders, helping you find the most suitable mortgage that aligns with your needs and financial situation.

Advice and Support: Mortgage brokers can provide personalised advice and guidance tailored to your circumstances. They can help you navigate any challenges, answer your questions, and address any concerns you may have throughout the mortgage process.

Overall, a mortgage broker can simplify the process of obtaining a stipend mortgage by providing expert advice, access to lenders, and personalised support from application to closing.

For more information on stipend mortgages, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273 002697.