Published On: Wed, Jul 10th, 2024
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Brits warned over ‘little known’ payslip code which affects mortgage chances | Personal Finance | Finance


First-time homebuyers have been alerted to a “little known” detail on their payslips that could jeopardise their chances of securing a mortgage.

In the current climate of soaring house prices and escalating mortgage rates, an increasing number of young individuals are struggling to climb onto the property ladder. Compounding this issue is the burden of student loan debt, which for many can reach staggering amounts.

Despite the fact that this debt is technically not supposed to affect mortgage applications, the reality is that repayments can indeed influence one’s mortgage prospects.

The UK is home to approximately 1.5 million people with outstanding student loans, and millions more are actively repaying the Student Loan Company. Graduates begin to pay back their loans once their earnings exceed a certain threshold, and the repayment amount varies depending on the plan they’re on.

Mortgage specialists at John Charcol warn that the sum you repay can affect your mortgage eligibility, reports the Mirror.

Mortgage technical manager Nicholas Mendes from John Charcol brokers has highlighted a critical point: “When a large chunk of your salary goes towards student loan repayments each month, it can reduce how much you can borrow for a mortgage. Lenders look at how much you owe each month compared to your income. If a big part of your income goes to paying off student loans, lenders may think you won’t be able to handle additional debt, which can lead to a smaller mortgage offer.”

If you’re a graduate gearing up to become a first-time home buyer, the mortgage experts at John Charcol emphasise how crucial it is for you to be in the know about your monthly repayments. They advise that if you’re uncertain whether you’re paying off your loan, to look for “CSL Student Loan Ded” or “CSL Ded” on your salary slip.

Additionally, having to deal with student loan payments every month can make the task of saving for a house deposit substantially tougher. Nick from John Charcol points out: “Student loan repayments can also cut into your disposable income the money you have left after paying all your bills. Saving a good deposit is important not just for getting a mortgage but also for getting better interest rates and terms. Because of student loan repayments, it might take longer to save enough for a deposit, delaying your ability to buy a home.”

Nonetheless, Sarah Coles, personal finance analyst at Hargreaves Lansdown, suggests graduates often have the upper hand over non-graduates. She argues: “It’s not all bad though, because going to university raises your average salary on graduation, which is going to help with affordability.”

The ability to comfortably meet mortgage repayments each month, known as mortgage affordability, is a key factor for lenders. The more you earn, the more appealing you are to these financial institutions.

As per the Department for Education Official Statistics, the average salary for a graduate in the UK currently stands at £38,500, although this figure can fluctuate depending on the profession.



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