Current property prices in London, act as a mortgage guarantor
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Property in London
Property prices, mortgage guarantor
act as a mortgage guarantor
Starting out: The cost of renting as a student can be expensive so an alternative is to buy as an investment.
Current property prices in outer London zones mean some of the families of this month's wave of university students and graduates will be able to buy property in the capital for not much more than the cost of renting.
According to Mentos.co.uk, which provides independent information and research on the European private financial sector, students can expect to pay from £150 per week for a room in a shared flat or house. But this often doesn't include bills and utility expenses, so the total expenditure can be far more than £600 per month.
With the help of personal savings and financial support from parents, however, it is possible for a student or new graduate to buy a property instead. Low interest rates mean using cash to buy a property outright may offer a higher return in the long run than traditional savings accounts. Alternatively, parents can buy a mortgaged property or act as a mortgage guarantor for their child. Taking advantage of tricks such as buying before it is built or 'off-plan' can also bring down the price.
current property prices in London
Keely Howard, 23, who is a midwifery student at the University of Greenwich, recently bought a new-build two-bedroom apartment in Eltham with her father contributing 60 per cent of the cost. She bought the property off-plan last year for £185,000 but now apartments similar to hers start at £225,000.
Keely says: 'Like most students I was living in fairly basic shared accommodation but it was pretty expensive at between £350 and £550 per month.
'I am limited to the area I can live in as I have to be close to university and the Queen Elizabeth Hospital in Woolwich where I do my residency.
'When I was looking for another place to rent earlier this year, prices were not very enticing and with all the talk of affordable property prices I started to look into buying a home and really wanted a new-build property.
'I found a development and I loved the apartments straight away. They were much more spacious and the specifications were of a high standard, which isn't true of most student accommodation.
'I used all my savings but I couldn't have bought it without my parents' help. My father agreed to buy the apartment with me outright as a financial investment for the family.
'At the time I exchanged, my apartment was still being built so I was able to truly make it my own by choosing the type of flooring, kitchen and bathroom tiles and all the other specifications. Another help was that the apartment came with all the appliances and the property's stamp duty was paid for.'
The average weekly student rent in London in 2008 was £102.35 - 67 per cent above the national average of £61.48Meanwhile, a guarantor mortgage is useful if you are on a low income as a graduate in a first job, for example, and need help to afford a loan. Mortgage lenders like extra reassurances that a home loan will be repaid, particularly in the current economic climate, so having a parent willing to bring their financial power to the deal can make all the difference.
Even if you can afford a mortgage on your own, having a guarantor will probably give you a wider choice of lender and mortgage deals.
Many high-street lenders offer guarantor mortgages, although they are more expensive than a standard variable rate.
The Co-operative Bank, for example, offers a parental guarantor three-year fixed-rate mortgage with a rate of 5.99 per cent until 2012. This is higher than the bank's current SVR of 4.24 per cent but the mortgage has no application fees.
Borrowers can have up to four and a half times their income plus one and a half times the guarantor's income but to be accepted, guarantors must prove they can afford their own commitments as well as the new lending. Jayne Atherton: The bank of Mum and Dad. Metro, 11-09-2009.
A mortgage guarantor is a name given to someone by whom it is pledged that a loan or other type of debt will be paid. Usually, a mortgage guarantor agrees that he or she will pay or perform another person’s debt or duty if that person fails to do so.
