As a parent of students I remember with dismay the quality of accommodation that was on offer when they were kicked out of halls in their second year at Uni. It seemed to me that in the University property game landlords held all the cards, they were reluctant to fix things and didn’t seem to care much care about the welfare of their tenants. Worse still, I saw rent as “dead money”.
It seemed there had to be an alternative. What if the student became a landlord, let out the spare rooms to his/her mates and became a home owner whilst at university or college? This is now a reality with the Buy for Uni mortgage from Bath Building Society. The rent from the housemates counts as an acceptable means of making the mortgage payments and we can overcome the need for a deposit by putting a charge on Mum and Dad’s property which would only be triggered in the event of a repossession and loss being incurred on the student property; an unlikely eventuality given the demand for student accommodation in most University cities.
So how does this work in practice? Let us assume a property value of £200,000. The student borrows up to the full £200,000 and covers some or all of the costs of the mortgage payments from the rent of his/her housemates. We take a collateral charge of £50,000 on Mum and Dad’s property (this does not involve Mum and Dad stumping up a cash deposit, simply a charge on their property). Obviously it requires the parents to have some equity available in their own property, and the parents still guarantee the mortgage payments, just as they would if the student was renting property. At the end of the course the student has the option to carry on living in the property, letting it out as a buy to let, or selling. Because this counts as the student’s main residence, there is no capital gain on the sale of the property.
It’s fair to say this is not for everybody, but it works particularly well for those who have long courses, and of course, parents who are able to and want to help their children onto the property ladder. Every year we come across students for whom this is the perfect solution to their University accommodation needs.
For more information please go to the Bath Building Society website:
www.bathbuildingsociety.co.uk/mortgages/mortgage-products-for-individuals/buy-for-uni
By Dick Jenkins, Chief Executive, Bath Building Society
