The lender has launched the ‘Buy for Uni’ mortgage, a 100 per cent loan, after discovering through research that there is apparently little difference between average student rents and average mortgage payments in Bath.
The building societyâ€™s target customers are both students and a significant proportion of parents, who themselves have financial security and equity in a home but who want to make sure their child has secure lodgings while at university.
Under the scheme, students may obtain a variable interest mortgage with a value calculated on income from room rental. Up to four rooms may be let out, in properties within ten miles of the campus.
Rent in total must amount to at least seven per cent of the original loan, a figure linked to the interest rate. The repayments may not be taken from a student bank account, but from a parent’s.
Both parents act as guarantors for the entire loan and a legal charge is made over the parental property if over 75 per cent of the student house value is borrowed.
The building society is optimistic that this offer, which reflects an increasing number of lenders marketing 100 per cent mortgages to first-time buyers, will tap into current trends and prove popular. On graduation, the lender gives the option of retaining the property as a buy-to-let investment.