Q My partner and I are hoping to buy our first home around this time next year. While we will have a (hopefully) decent deposit of £25,000 behind us and we both have a strong credit history, there is a chance that I will be starting a full-time PhD around the time we make an application for a mortgage. The PhD would be funded by a grant that would provide me with £15,000 a year tax free to live on as well as covering my academic fees. My question is, would a mortgage provider accept this grant as income rather than a salary? Would my not being technically employed pose any problems?
A Yes, being on a grant will pose a problem when it comes to getting a mortgage – but not an insurmountable one. People studying for a PhD – as well as members of the clergy and some charity workers – who receive what is referred to as stipend income will find that most high street lenders will turn down any mortgage application. However, not all lenders regard stipend income as an unreliable source of income and will be prepared to take a mortgage application seriously.
On the face of it, you seem to be in a strong position. According to Pete Mugleston of onlinemortgageadvisor.co.uk, “some stipend mortgage lenders only accept stipends as a secondary income, so require another borrower to have a job”. So assuming your partner is in full-time employment when you apply, you’ll have a better chance of getting a mortgage than someone applying on stipend income alone.
Your strong credit history also works in your favour, as does the potential size of your deposit. But, says Mugleston, “stipend mortgage lenders will also look at your future earnings in your profession as a guideline for future affordability, so if they grant you a PhD stipend mortgage in the UK now, they can be confident it’s going to be affordable once your PhD has finished”.
He adds: “For this reason, certain types of PhD may be harder to get approved for than others, if, for instance, it is less likely to turn into a full-time position.”
To get a firm idea of your chances of getting a mortgage with your PhD grant money, steer well clear of the high street. Head instead to a specialist mortgage adviser – search for stipend mortgage adviser on the internet to find one. The adviser should know which lender is likely to accept your mortgage application.
Want expert help finding your new mortgage? Use our new online tool to search 1000s of deals from over 80 lenders with the Guardian Mortgage Service, powered by L&C.