Parents dread empty nest syndrome even more these days because they know that they’ll probably have to fit the bill to rent an appropriate London property near the University. However, a new scheme by the Bath Building Society offers students in the UK the opportunity to buy a house near their university with a student mortgage, instead of throwing away their parent’s money on rent.
Students can pay off the mortgage loans by using the money they would normally use for rent to make interest-only payments. Parents have to stand as guarantors and are required to borrow 20% of the loan against their own house if they require a loan larger than 80% of the total payment. One of the conditions of the student mortgages, however, is that the property has to be within a ten mile radius of the student’s university.
While students may have a reputation as being among the more unreliable members of society, the Bath Building Society has assured the press that not one of the existing 76 mortgage holders have been unable to keep up with their monthly payments.
Dick Jenkins, Chief Executive of Bath Building Society, remained positive about the outcome of the student mortgage initiative. “We haven’t had any payment glitches … The beauty of this mortgage is that it appeals to the large numbers of, for want of a better word, middle-class parents out there, who want to see their children on the property ladder, but who don’t have the spare funds to do so. From our point of view, that is a very reliable market to lend to,” Jenkins said.
Parents have to carefully balance the risks and rewards if they are considering a student mortgage. While their house may be put at risk if the monthly payments aren’t met, student mortgages could be a good investment opportunity and save them money in the end.
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