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Stipend Mortgages

 

In this episode of the Mortgage and Protection Podcast, Adam Nunn explains all about Stipend Mortgages

What is a stipend mortgage and how do they work?

It’s where income from a stipend is factored into a lender’s assessment of an application. It could influence how much they can lend you or your partner. A stipend is typically available to training professionals and researchers or members of the clergy.

Does a stipend count as income in the UK? 

Yes, it’s a form of an income. It’s a fixed tax-free income designed to help cover living costs like accommodation, food and educational materials. 

The most commonly seen stipends are usually research stipends offered by universities to postgraduates. You might also have unpaid intern stipends, where government agencies,  businesses or nonprofit organisations that aren’t paying a salary can offer you a stipend to cover the living costs. It could also be religious stipends for a priest or a church volunteer performing charitable work in the local community.

What’s the criteria for a stipend mortgage?

A lender that will consider using a stipend is essentially making a judgement on how reliable and sustainable the income will be.

The industry sector that you’re training or working in is a really important consideration. Things that help you obtain a mortgage might include how long your contract is. Longer contracts tend to be more beneficial to your circumstances.

Whether or not there’s a guaranteed job at the end of the contract is also important – that way a lender can be completely satisfied that your income will continue once the stipend arrangement is finished. 

Certain lenders will only accept stipend as a secondary income. Having a partner that is either employed full-time or self-employed does create more options for you. The stipend could then support your joint application.

How does the mortgage application process work? Are there any differences when it comes to stipend mortgages?

It’s not too different. There may be more background checks to complete, such as obtaining current contracts and potential future job offers and there might be employment references as well – but that’s quite a common requirement. It’s not dissimilar to more straightforward situations.

How can a mortgage broker help with stipend mortgages?

We would hope to meet you early on in the process to understand your stipend and whether you’re looking to buy by yourself or with a partner. We can help guide you right from the start through to the end of the process of you purchasing a property or remortgaging a home.

Only a small number of lenders consider stipend mortgages and every lender’s stance is different. I’ve recently been helping a client receiving a research stipend. There were many different outcomes. Certain lenders would only accept religious stipends, while others would only use stipend income when applying with a partner who’s employed or self-employed. 

Another lender would consider lending independently on that income, but would only factor in 60% of the total amount. There’s so many different outcomes, even before considering the deposit you need, and the income multiples the lender will consider. So to find yourself the most appropriate mortgage, you’re best placed getting a broker to research all the options for you.

Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.