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Mortgage Advice for Student Lettings

August 28, 2017Tags: Landlords | mortgages | Student Accommodation

If you’re planning to invest in student lets and need to borrow to buy the property, the first thing to know is that you can’t simply take out a standard Buy to Let mortgage.

Multi-lets are viewed by lenders as higher risk than other types of Buy to Let, so you’ll have to take out a specialist HMO mortgage, which not every lender offers. So it’s worth speaking to a broker who has experience in arranging finance for student lets and makes sure you get the most suitable deal.

Interest rates can be usually around half to three-quarters of a percent more than for standard Buy to Let mortgages, because of the risk factor. In terms of loan to value, although it’s possible to borrow up to 85%, the interest rate could be higher than if you borrow less.

You’ll almost certainly have additional conditions attached to your mortgage. The two most common are:

  1. All the students must be on one assured shorthold tenancy agreement (AST) 
  2. There must be no more than five people living in the property.

Needless to say, when you’re doing your financial calculations to check how viable the investment is, make sure you know the maximum number of tenants you’re allowed. If you plan for rental income from six students and then only realise when your mortgage offer comes through that this isn't possible, the purchase may be aborted and your time and money will be wasted. 

And remember that on top of your lender’s conditions, your local authority will have their own policy for houses in multiple occupation (HMOs), which can vary a lot from one area to another. It may be that in certain zones, HMOs aren't allowed at all.

Buying from a specialist student accommodation provider

There are now a lot of companies marketing student accommodation all over the UK to investors.

These properties are usually new-build and most come with a full-management package and a guaranteed minimum yield for an initial period. In order to provide investors with a complete service, these companies may have their own team of brokers or panel of lenders they’ll encourage you to use.

If you’d like to speak to one of our mortgage experts, remember that the initial consultation is free of charge**. Get in touch with your local branch and we’ll be happy to arrange an appointment.

Top tip: Don’t forget to tell your landlord insurance provider that you’re letting to students. It may not increase your premium but could make a difference if you have to file a claim.


YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

**Our initial mortgage consultation is free. We will charge a fee between £399 and £999 on mortgage application. The amount we will charge is dependent on the amount of research and administration required. We reserve the right to charge a subsequent fee of £99 for each further application that may be required.

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