Graduate Mortgages

A Graduate Mortgage is a specialised type of interest-only or repayment mortgage which is aimed at students who have completed a degree from a UK university. Typically, to qualify for a graduate mortgage, the following conditions must apply:

• You graduated within the past seven years
• You have been employed for at least twelve months

Although the credit crunch is forcing lenders to withdraw several mortgages, some graduate mortgages are still available.

The average UK graduate is expected to leave university with a debt of nearly £15,000*, which makes saving for a deposit on a property extremely difficult. For this reason, a graduate mortgage allows you to borrow up to one hundred percent of the property's price. If you wish to borrow the full amount, you are usually required to nominate a parent or guardian to guarantee your repayments. In this case, they would secure part of the mortgage against their assets too. If you later start to earn enough to cover repayments for the entire mortgage amount, you can remove the guarantor from the agreement. For more information see Guaranteed & Joint Mortgages.

In some cases, you are able to borrow up to one hundred and two percent of the property's value. This extra two percent can help cover the additional costs of buying a property, such as stamp duty land tax and solicitor's fees. In any case, a lender will only usually allow you to borrow up to four times your annual income. They will also consider your student debt, credit card debt and any other financial commitments, such as a personal loan, before making a final decision. The larger your existing debt, the less they will be willing to offer you.

Since you generally borrow a large percentage of the property's value, many lenders will charge a Higher Lending Fee, which is designed to protect them when the loan-to-value (LTV) ratio is very high. The LTV measures the size of the amount borrowed in relation to the property's value, and is given as a percentage. For more information see Mortgage Fees.

* Figures based on data from guardian.co.uk