The First Step: Buying Your First Home While On A Stipend

Your home may be repossessed if you do not keep up repayments on your mortgage.

A fee of up to £495 per mortgage may be charged depending on individual circumstances.

The information contained within was correct at the time of publication but is subject to change.

4th March 2025

Our client, a dedicated PhD student at Swansea University, presented a rather specific set of circumstances for his first home purchase. Completing his doctoral studies, his primary income consisted of the standard PhD stipend, which for the 24/25 academic year, worked out at roughly £19,237 per annum. Whilst this income provided a solid base, securing a mortgage presented its own set of hurdles.

Luckily, his Dad generously offered to stump up the majority of the deposit, a crucial factor in making homeownership a reality. With this support, our client aimed to borrow the maximum possible mortgage amount, with the understanding that his Dad would cover the remaining balance. To ensure his Dad's investment was protected, we needed to find a lender willing to secure a charge over the property, guaranteeing the return of the deposit upon its eventual sale.

Beyond the financial considerations, our client had particular lifestyle requirements. He intended to rent out the second bedroom of the standard two-bed terraced house, which he'd successfully negotiated to purchase for £240,000, to a mate. Therefore, lender flexibility regarding lodgers was essential. Given he was in his mid-twenties, he also prioritised affordability and long-term financial planning. We explored the longest possible mortgage term to maximise borrowing capacity and minimise monthly payments. To further enhance budget stability and mitigate interest rate fluctuations, we focused on securing a 5-year fixed-rate mortgage, which also allowed him to borrow a higher amount than a 2-year fixed rate would allow. This combination of factors required a strategic approach to navigate the mortgage market and find a lender that could accommodate his unique needs.

Following thorough research, NatWest emerged as the ideal lender for our client's unique circumstances. Their willingness to accept a stipend as the sole income source was crucial. To proceed, they requested the university award letter, the client's three most recent remittance slips (as a substitute for payslips), and three months' bank statements, alongside details of his regular outgoings.

NatWest offered a 40-year mortgage of £83,797, necessitating a substantial deposit of £156,203 from his father. NatWest's own gifted deposit letter was used, facilitating the father's confirmation of a second legal charge on the property. The 5-year fixed rate secured was 4.32%, reverting to a standard variable rate of 7.49%. The APRC, representing the total cost of the mortgage over its lifetime, was 6.6%. Importantly, the product was fee-free, with no valuation fee. The resulting monthly mortgage payment was £534.10, a figure that was comfortably affordable within the client's stipend income.

Furthermore, NatWest readily accommodated our client's intention to rent out the spare room. The client was extremely pleased with the outcome, and the application process proved to be both quick and straightforward.