Does a Student Loan Affect a Mortgage?
The short answer? Yes, a student loan can affect your mortgage application—but how much depends on your circumstances and the lender’s criteria. In some cases, a student loan won’t impact your mortgage eligibility at all. Read on to understand how your student loan could influence your mortgage application.
How Does a Student Loan Affect a Mortgage?
When assessing how much they’re willing to lend, mortgage providers focus on three key factors:
- Your income – Generally, the more you earn, the more you can borrow.
- Your existing financial commitments – The more you owe, the less you can borrow. However, lenders focus on your monthly payments, not the total balance of your debts.
- Your credit history – A strong credit score makes getting a mortgage with better rates easier.
The good news? Student loan repayments are relatively small compared to other forms of debt, so they may have little impact—especially if you’re still below the repayment threshold.
What If You Earn Below the Student Loan Repayment Threshold?
It won’t affect your mortgage application if you don’t yet earn enough to start repaying your student loan. Lenders assess your actual outgoings, so if your student loan repayments are currently £0, they won’t reduce your borrowing power.
However, once your income increases and repayments begin, this will be factored into affordability calculations. The good news? Your repayments scale with your earnings, meaning that a salary increase shouldn’t dramatically affect your mortgage potential.
Self-employed? Lenders will check your Tax Year Overview and Tax Calculations (SA302) to confirm your student loan repayments.
Do You Have to Tell a Mortgage Lender About Your Student Loan?
Yes. Mortgage lenders require full disclosure of all financial commitments. Failing to declare your student loan could be considered mortgage fraud.
Typically, student loan repayments are included in your mortgage application’s ‘committed expenditure’ section. If you’re employed, lenders will verify this by checking your payslips. If you’re self-employed, they’ll review your tax returns.
Should You Overpay Your Student Loan to Improve Your Mortgage Chances?
Probably not. Mortgage lenders focus on monthly affordability, not the total size of your student loan balance. Two applicants earning £35,000—one with £15,000 in student debt and one with £60,000—will be treated the same if their monthly repayments are identical.
Instead of using spare cash to overpay your student loan, you might be better off saving for a larger deposit. A bigger deposit can lower your interest rates and improve mortgage affordability.
Should You Clear Student Loan Debt or Other Debts Before Applying for a Mortgage?
It depends. Paying off your student loan in full would eliminate monthly repayment, potentially increasing your borrowing power. However, since lenders assess monthly outgoings, clearing high-interest debt (like credit cards or car loans) is usually a smarter move.
Consider this:
- For every £100 of credit card debt, lenders assume £5 per month isn’t available for mortgage repayments, reducing the amount they’ll lend.
- Reducing a £10,000 car loan to £5,000 might not increase your mortgage offer—unless it lowers your monthly payment.
If you have extra savings, clearing expensive debts or boosting your deposit will often have a greater impact than overpaying your student loan.
Does a Student Loan Count as Income for Mortgage Applications?
No. Since student loans are not taxable income, they don’t count when lenders assess affordability. However, some stipends (e.g., PhD funding) can be considered as income—check with your lender.
Do Student Loans Affect Your Credit Score?
No. Student loans don’t appear on your credit report, so they don’t impact your credit score. However, lenders will still see your repayments on your payslips or tax documents, so they factor them into affordability calculations.
What If You Have a Student Loan and a Poor Credit Score?
Having a student loan won’t directly affect your credit score, but if you have other debts or late payments, lenders may be hesitant to approve your mortgage. If this applies to you:
- Check your credit report and fix any errors.
- Reduce existing debts before applying.
- Consider specialist mortgage lenders who cater to applicants with lower credit scores.
For more tips, check out our article; Steps to Assess and Improving Your Credit Score
Final Thoughts: Does a Student Loan Affect a Mortgage?
Yes, but usually less than other types of debt. Mortgage lenders care more about your monthly affordability than the size of your student loan balance.
Before applying, focus on: ✔ Keeping other debts low ✔ Saving for a larger deposit ✔ Checking your credit score
For more tips, check out our article, Mortgage Tips for Graduates.
Ready to take the next step? Remember, this advice on how a student loan affect a mortgage is just the beginning. Contact The Mortgage Blog on 0333 335 6595 or message us to explore your options and get personalised advice tailored to your unique situation.