Our Guide to Stipend PhD Bursary Income Mortgages
In our experience, individuals with these forms of income might include PhD trainee teachers, NHS students or even in some situations, members of the clergy.
In what follows, we at NeedingAdvice well examine this area and outline some ways in which mortgage application difficulties may be overcome.
Why is it difficult to get stipend and bursary income mortgages?
Perhaps the first thing to clarify is the difference between a stipend, bursary and scholarship.
A stipend is usually a sum of money advanced by an employer or other organisation to help an individual cover some of their basic costs of living. That can sometimes apply in the context of education, when trainee professionals are improving their qualifications and skills, though it might also be encountered in employment on an on-going basis, such as might be the case with the clergy.
By contrast, a bursary is income awarded by an organisation or an employer to someone who is studying under the auspices of having limited means. The award of a bursary is usually income-related and is nothing to do with academic achievement where financial aid is normally referred to as a scholarship.
The problem for recipients of stipends and bursaries arises when mortgage providers believe that either:
- the sums they are receiving are insufficient to justify a loan in terms of being able to maintain repayments or;
- that the income is not guaranteed for a sufficient time in future.
Both of these factors essentially mean that for some mortgage lenders, bursary and stipend applicants would be a high risk to lend to. That’s why it can be challenging when trying to secure a mortgage with bursary income or a stipend income mortgage.
Of course, some applicants believe that this is short-sighted and that their future income prospects should be taken into account as well. Others might argue that as bursaries are typically paid tax-free (but check the specifics with HMRC in advance), their income should be considered to be both gross and net, rather than having automatic reductions applied which are presumed to be the effect of taxation.
How do I qualify for a stipend PhD bursary income mortgage?
Many lenders may decline to offer mortgages based upon this type of income.
Fortunately, there are some who will do so but even they may look closely at issues such as:
- is this a joint mortgage application? Some lenders may require a second more conventional income to be associated with the application;
- the duration the stipend or bursary has been received over and how long it is guaranteed to continue. If you only have a short-term income forecast from your bursary or stipend, it may be difficult for some lenders to continue with an application for stipend PhD bursary income mortgages;
- the profession you will take up the upon completion of your current studies. It is extremely difficult to generalise here because some lenders may be willing to accept clergy but no other forms of study whereas other lenders may willingly accept PhD level education for people planning a career in the NHS. Note also that some may be willing to accept income based on your estimation of positions you will secure downstream whereas others might demand evidence of a firm job offer already being in place;
- your existing overall financial position, taking into account your total income and average monthly outgoings. As you might expect, if the resulting figures indicate you will be unable to afford mortgage repayments then you may struggle to get an offer. This, in principle, is no different for stipend and bursary recipients than any other applicant;
- it is perfectly routine for a potential lender to examine your credit history records. Minor hiccups here might not be an issue but if you have more serious credit problems on your historical files that might be a particular problem in your circumstances.
How much can I borrow for a stipend bursary mortgage?
As you might imagine, ultimately the amount you can borrow will be driven by two things:
- the amount you are trying to borrow against the valuation of properties you are looking at. Most lenders will require you to find a deposit from your own financial resources and the higher the percentage you find, the easier you may also find a mortgage. Most lenders will have a maximum loan-to-value (LTV) percentage which they will not exceed – e.g. 90%. In the case of stipend and bursary income recipients, some lenders may offer a lower LTV;
- how much you could realistically afford to repay each month against your mortgage borrowing. This figure is derived based upon a calculation of all of your permissible income versus your regular committed monthly outgoings.
Some lenders may be happy to take stipend income as a single income and might be willing to lend multiples of up to 4 x that income.
As touched on above, both the amount you can borrow and your chances of access to funds may be increased in circumstances where you are applying as a joint applicant with another person who is in receipt of more conventional income.
Next steps – Stipend PhD bursary income mortgages
There are large numbers of stipends and bursaries – and they may be used in an ever larger number of different educational and employment situations.
The position of a bursary student studying for a PhD, as part of their career in the NHS, might be very different to that of say a clergyman studying at a seminary for a career in the church. So, different solutions for stipend and bursary income mortgages might apply.
We have only touched on some of the possibilities here and we would welcome the opportunity to discuss in more detail how we can go forward with you.