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Using Stipend Income on a Mortgage Application

Details about whether you can use stipend income as an earnings stream in your mortgage application - and how this might affect the maximum you can borrow.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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What is a Stipend Income?

Stipend income, or a benevolence income, is a regular payment you might receive to support your living costs during training or while working, for example.

Many people receive stipends from a charity or as a study grant and may accept this as a core part of their income for some time.

However, many mortgage lenders are reluctant to include a stipend in affordability calculations, making it tricky to find borrowing to purchase a property.

In this guide, we'll explain how you can use a stipend towards your mortgage application and which lenders are most likely to consider it! For more assistance finding a mortgage with a stipend, contact Revolution Brokers on 0330 304 3040, or drop us a message at [email protected].

Which UK Mortgage Lenders Will Consider Stipend Income?

When using stipend income towards a mortgage application, the first factor is to seek advice from an independent broker who can steer you through the process.

Lenders will need to know information such as:

  • Whether you're applying for the mortgage alone or jointly, and what other income sources you might have.
  • How long you have been receiving the stipend, and if there is a limited duration of this income stream.
  • Your profession, with stipend work more common in PhD applicants or members of the clergy.
  • Future work aspirations, and whether you have a job lined up once your studies or current work is completed.
  • Information about your financial circumstances and whether you have any debts.
  • Credit history details and other borrowing or issues on your file.
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Can I Get a Mortgage When Receiving a PhD Stipend?

Yes, it's possible - although many mainstream lenders may reject the application. This happens because the stipend is only short-term, and there might not be any guarantee you will get a full-time position once your PhD is complete.

In this situation, a broker is key to identifying which lenders will be able to help.

Revolution considers your future earning potential and how likely it is that you will find gainful employment after your studies.

Are There Stipend Mortgages for Clergy Members?

Another common scenario is where a clergy member receives a stipend, often as a housing allowance. Lenders are more likely to consider this type of application because they are generally paid for the long-term.

Clergy members also qualify for mortgage interest deductions, making the affordability criteria easier to meet.

In most cases, the lender will want to see that you have been receiving the stipend for at least one year, and they may ask for confirmation from your Diocese.

How Much Can I Borrow on a Stipend Mortgage?

Affordability calculations look at what you earn and what you spend, and most lenders work on a multiple of your annual income to arrive at a maximum mortgage value.

Therefore, the maximum you can borrow depends on your earnings and applying to the right lender with a generous multiplication calculation.

Can I Get a Stipend Mortgage as a Single Applicant?

Yes, you can, although you will need a niche lender, as most high street banks will not consider offering a mortgage to a sole applicant reliant on a stipend.

Other more specialist providers will consider the application and offer a maximum of four times your annual stipend earnings.

As an example, the below shows what you would be likely to borrow on a stipend of £25,000 a year:

Lender:

Income Multiplier:

Maximum Mortgage:

High street lender

0

£0

Specialist stipend lender

0

£0

Stipend lender able to consider sole applicants

Four x annual stipend

£100,000

Are There Stipend Mortgages for Joint Applicants?

There are indeed, and if one applicant is earning a stipend and the other in employment, this might make the mortgage application a little easier.

Below you will see the same lenders as per the previous example, but considering the same applicant with an annual £25,000 stipend, applying with a partner on a £30,000 salary.

Lender:

Income Multiplier:

Maximum Mortgage:

High street lender

Four x annual salary (excluding stipend)

£120,000

Specialist stipend lender

Four x both incomes

£220,000

Stipend lender with more flexible terms

Five x both incomes

£275,000

What Deposit Do I Need to Get a Stipend Mortgage?

Depending on your credit history, age, affordability, and the term of the mortgage, lenders have different deposit requirements.

If your application is seen as a higher risk, you will need a higher deposit because you have a low credit rating, for example.

Generally, the minimum is around 5%, and lenders tend to accept deposits received as gifts from friends or family or paid by the same organisation that pays your stipend.

Can I Get a Stipend Mortgage with an Adverse Credit Rating?

Your options will be limited if you also have a bad credit history and will depend on:

  • What your credit issues were (i.e. minor late payments or serious repossession).
  • When the problems occurred.
  • Whether you have now settled your debts.

Applicants with more recent credit issues or more severe problems will usually pay a higher interest rate.

How do Buy to Let Mortgages Work on Stipend Income?

Buy to let is a slightly different scenario:

  • Deposits will usually be around 25%, although some lenders will accept from 15%.
  • Most buy to let lenders need you to have a minimum yearly income, often from £15,000 and up to £25,000, to qualify.
  • Your rental income will be stress-tested to make sure you can afford the repayments. That is usually based on 125% up to 145% of the interest-only mortgage payments.
  • If you are a first-time investor, you will need to meet stricter affordability criteria and may need to pay a higher deposit or less competitive interest rates.

Professional Advice with UK Stipend Mortgages

If you receive a stipend and are looking for mortgage lending, or have been rejected elsewhere, give the mortgage advisors team a call on 0330 304 3040 or send us an email to [email protected].

Our teams work with PhD students, clergy members and all types of graduates to find competitive, secure mortgages when receiving stipend income.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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