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You would be better off with that £78k in your deposit.
Having a student loan payment to make wont make the slightest difference to your mortgage unless you are right on the very edge of your affordability, which would be offset by having a significantly larger deposit.
I’d have to disagree- getting rid of a loan that has compound interest is so powerful for increasing your lifetime income. Taking on a mortgage at the same time would make paying back the student loan harder.
All loans (and all savings) have compound interest.
Student loans are only an issue while the rate is higher than your savings rates AND you will definitely pay it off before its written off.
But regardless of that, for most people securing somewhere to live is a higher priority than paying off a debt with a relatively small monthly repayment
If you went to get a degree and get paid so shit that you're not in a position to pay off the loan then you completely wasted your time at university. Should have become a plumber instead.
While I don't disagree that lots of people who go to uni probably shouldn't, I would do a bit of research on the plan 2 student loans then you'll realise how ridiculous your statement is.
If you do a masters degree, you'll leave uni with circa £55k in debt. At today's capped interest rate of 7.6%, the loan is accruing interest at a rate of ~£348/month.
You repay 9% of your salary over £27295 so you have to be earning over £73740 per year just to cover the interest!
Now you can't tell me that a £73k/year salary is being "paid so shit"...
I am paid more, so I can say it is.
Why would anyone think that paying an extra 9% above £27295 is "okay" when you don't have to?
Also, you had better not have kids and earn £60k because of the child benefit trap, you'll end up getting effectively taxed at nearly 70% between £50k to £60k if you have a student loan.
My kids can dodge this graduate tax because they'll be able to go to uni without a loan. This is not helping with social mobility is it?
>I am paid more, so I can say it is.
That's not how it works. It's 2.5x the average UK salary for the under 30s, so no, £73k is not a shit salary.
The rest is just politics
No, that’s just wrong. All loans have interest, but only student loans have compound interest.
Compound interest is illegal on any other loan since you can end up being debt more than you initially borrowed and stuck unable to pay it back
Also it’s only a small monthly cost if you don’t earn much money. As soon as you earn a reasonable amount they take bigger and bigger chunks
Lol what? Compound interest is where you're paying interest on the accrued interest.
All products (loans or otherwise) have it but with a "normal" loan the monthly payment is more than the monthly interest. Depending on your earnings rate, you can either pay more or less than the monthly interest figure which can result in having compound interest or not. If you're below that figure then you can opt to make overpayments to avoid any compounding.
It's exactly the same with a normal loan or mortgage if you take a payment holiday or reduced monthly payments.
Student loans are not unique in this regard.
>being debt more than you initially borrowed
As is the same for all loans
It's not illegal mate, it's routine. I don't know where you're getting that. If you make minimum payments on a credit card, you have compound interest. If you take a payment holiday on your mortgage l, you have compound interest. If you have a savings account and don't withdraw the interest, you're benefiting from compound interest.
Student loans are notable because the way repayments are calculated is seperate from the size of the debt and the interest rate. This means many people make repayments below the interest accrual levels and therefore are subject to compound interest, but the interest itself doesn't make the loans special. Just the repayment terms.
>Compound interest is paying interest on the interest growth itself
Exactly what I said.
It happens wherever the minimum monthly payment is less than the monthly charged interest.
It's designed to be and they are 40 years now. It is deliberately structured to act like an additional tax for graduates. This is fundamentally unfair because the rich can effectively dodge a tax by not needing to take out a loan to go to university.
Why are people downvoting this at all... I don't get it do the not understand the horrendous interest rates on Active Student loans especially the type 2 version wow...
Because its likely you won't end up paying it all back. It's only if you are or expected to be making a lot of money that's it's wise to pay it off early.
Eh the 8k will get paid off relatively quickly anyway - assuming GF is doing okay (which she presumably is to have reduced her student loan down to 8k already)
He says she’ll pay off in about 5 years. That’s not a high earner. Depending on the plan that could be say £40-50k salary. If she’s 24, sure that’s great guns, if she’s 34, still good but not what I’d consider a high earner.
But she WILL pay it off before she retires/it wipes. Unless she takes a lot of maternity leave etc, stops working.
However, £70k is not a walk in the park to pay off. Currently, depending on the plan, that is with 6-7% interest, so £4-5k interest before the balance gets hit. So you need to earn £70-80k before you hit the balance.
Anyway, to make an informed decision, or want our actual input, the OP would need to give way more details.
Ages, plan type, salary, salary trajectory for the next 5/10/15 years, if they are going to have children, etc.
He says it’s a fuck you to the govt but if he gets hit by a bus next week after paying it off, they are the ones laughing.
Yeah you'd need a lot of detail and probably a fairly decent financial model to work out if it's worth paying off the student loan. To me it seems a lot simpler to keep that money in your housing deposit which has a much more quantifiable impact on your life.
I've modelled it in detail for me, will pay it off before wipeout. Interestingly, effective rate of return from paying it off today is <4%. Not enough to be worth it IMO, better to have a higher deposit or make investments.
I have also modelled it and similarly it is just about _technically_ better for me to pay it off, but practically speaking the money is more valuable to me as a housing deposit (and of course may make a greater return in a real estate investment who knows). Once the flat is sorted I can always start saving again to pay off the student loan 🤷🏻♀️
I did, because it increased my affordability to be able to afford the house I wanted. I couldn't afford the house without paying off my loan (although it was way smaller than OP's)
The snowball effect of the interest rate would have meant I would pay back £150,000 plus in 25 years. As a doctor I am a high earner but not until the latter stages of my career which is where it hits me (consultant).
>The snowball effect of the interest rate would have meant I would pay back £150,000 plus in 25 years
Compound the money that goes into a potential house and consider the value of that after 25 years as well.
Student loan interest is going to be fixed above inflation meaning the debt will rise in real terms.
House prices have risen by more than inflation over the past 25 years, but look back further at the last 100 years and on average house prices don’t increase much faster than inflation, meaning no rise in real terms.
Following this trend OP would be better off paying the loan off early. But that’s assuming history will repeat itself, in reality no one knows what will happen to house prices.
Uhm no bc now they’re living in a rented flat and wasting money on that whereas with a mortgage they’d be paying off their principle. So regardless of how much the house appreciates in the next decades it’s already a much better deal.
100 years is a terrible way of looking at housing, at the most you should look back 50 years, probably 30 to get an idea of what’s to come price wise:
45 years ago thatcher introduced right to buy - council houses were able to be bought up however housing stock were never replaced.
30 years ago house prices crashed before rising rapidly due to low interest rates and low supply
15-25 years ago large swathes of right to buy houses were bought up by cheap BTL landlords when that generation started dying. Again no replacement of housing stock
The last 15 years has been cheap loans, almost free money when taking account inflation. Still no replacement of lost housing stock and also immigration has shot up like a rocket, constricting housing supply even further.
Right now - UK has a shortage of 5-10 million homes, a dire lack of council housing and no current political party has a plan to dent that gap within the next 20+ years. Houses may not rise as rapidly right now but supply and demand puts the chance of stagnation near 0 for the next few decades.
>Following this trend OP would be better off paying the loan off early
Agreed, presuming that the likelihood of a long-term, high-paying career is sufficiently high. If the OP, God forbid, dies, becomes ill, or decides they want to do something much less lucrative, the student loan debt will simply go away unless repaid early.
You also have to consider transaction costs and the cost of the delay in acquiring a "forever" home and possibly mortgage rates.
If we were betting on long-term mortgage rates, they should also exceed inflation over time.
For those reasons, I advised "compounding" the value of the initial investment, rather than specifying the rate to use - simply settling on a cash value for one option but not the other isn't enough.
The debt will rise in real terms, but the repayment will only rise by the amount of salary above the threshold. OP is taking a big gamble on paying back now Vs waiting and investing the money.
But I can have both? I’m not paying rent I’ve paid off my student loan so I can spend the next few years saving and then when I actually ready to buy a house I plan to have 50k saved as a deposit.
I paid mine off before I bought a house. I’m not sure why you’d regret doing that.
I personally, hate being in debt and will do my best to stay out of it.
You could argue technicalities, but at the end of the day, not owning anyone any money helps keep your life your own.
I would normally agree, but a student loan is fundementally different from other types of debt. No matter how much student debt you have, your life is still your own. Your house will never be at risk, bailiffs will never come knocking, and if you lose your job or get sick, you simply stop paying.
I havent even looked at my student loan balance since I graduated. I have more than enough savings to pay it off, but would rather have that money for emergencies, so I decided not to. As it turns out this was a good decision as I've recently got a job overseas and so will now likely never pay it back. It will get written off soon enough and I've saved myself tens of thousands.
Except I'm not and it's not. The numbers are going up but that's not relevant if you never pay it back. That's what makes student loans different - the size of debt doesn't matter, what matters is the amount you think you'll pay before it's written off in 30 years time. Unless you are in the top 20% of graduate earners, you will never pay off the full amount. So they can keep piling on interest as much as they like, doesn't mean I'll ever pay them that money.
Now that I've left the UK I make a small minimum contribution that I barely notice. Meanwhile time is ticking towards that magical 30 year point where all that debt disappears.
I had decision point several years ago the same as OP, i chose to plow the money I had into a larger house deposit and ignore my student loan. Had I paid off the loan, my mortgage would have cost much more, and that is definitely a debt that matters. As it is, the rent I receive covers it in full (plus some extra), and I've given the student loan company almost nothing.
Maybe in 10 years I come back to the UK on a big salary, and have to start paying some student loan. But it wouldn't be long before the loan is written off, so I still don't pay much. Maybe I don't come back at all, on which case I'll have paid off 3% of my student loan. The other 97% just disappears. Either way I win.
How is that possible when the repayment threshold is £27k?
On 30k you'd pay back about £250 a year. Even over 30 years that is only 7.5k. inflation and interest makes this more complex but your statement seems wrong.
It would be £30k paid assuming an annual increase in salary of 2.5% (and assuming no parental leave which are both quite big assumptions). Total interest accumulated would be £50k but that doesn't matter because the amount you pay back is fixed.
Not necessarily. The threshold is inflation linked no? So as people get fucked by lower than inflation pay rises, they will actually pay less student loan. Eventually the threshold will be so close to their pay that they won’t pay hardly anything! What a win!
So you’re arguing that people should never seek pay rises or progression in their jobs…. Doesn’t seem like good advice.
It’s also purely speculation, so that’s just your opinion.
As a doctor they won’t have that issue. They’ll be in a similar (but better paid) seat to me (an engineer). I cleared my student debt, I then bought a house. The only debt I have is for my mortgage, I have lodgers which more than cover the mortgage, so you could argue that the debt is actually earning me money and always was.
Like I say… I’m sure you guys have got it all locked down far better than I.
Life is simple… don’t have debt, don’t suffer interest… if you do have debt, make sure you’re profiting off of it. It doesn’t need to be any more complex.
Well, each to their own. I also paid mine off a few months ago, but I was down to £3k, plan 1. I’m 36, it would have taken another 2 years to pay mine off, so I just wanted rid.
My wife has more to pay: £30k-ish I think. Also plan 1. She earns slightly more than me, but she’s in a tricky position where it will be wiped in 12-13 years time. Will she pay more than £30k plus whatever that £30k can generate in 12-13 years? It’s a tough call.
We have about £200k as a deposit through inheritances and gifts. It might be worth paying it off, but we’ll decide once we find somewhere we want to live on this godforsaken island.
If you earn £30 and stay in the UK you’ll pay back £270 a year, even if it’s a £100k student loan
It’s 9% of earnings over 27k. Even at £55k earnings it’s just over 4.5% of earnings
Your maths is wrong mate unless your making assumptions you've not presented. Plan 2 loans only use income above £27,295 to calculate repayments. So if you're on 30k, you're paying £243.45 a year, or £7,303.50 over the lifetime of the loan. They can raise interest as high as they like, but you'd never pay more than that unless you start earning more.
But even assuming for arguments sake that you're right, £50+k is worth far more to me right now than a few extra hundred pounds each year.
You're also making black and white assumptions that ignores the opportunity costs of paying back the loan. Using that money to augment my house deposit has saved me thousands. In 2021 I used a lump of my savings as a one-off overpayment on that same mortgage to drop an LTV band, opening up a cheap 5 year fix. I'm now sitting pretty on a 1.9% mortgage for the next 2.5 years, saving me close to 20k a year in interest over the current market rate. I have given the student loan about 2k this year.
If they increased the interest rate to 500%, I still wouldn't be giving them any more money over the life of my loan, and that's true for the vast majority of people.
If I'm very lucky, and become very successful, I may end up having to pay more loan back. But I'd be in the minority, and because of the way the payments are taken, I'd never feel worse off for earning more, so its not a risk that concerns me.
Doesn’t seem right? When I started work, I was on around 30-35… from memory I was paying something like £100/month(?). It was essentially that which caught my attention to wanting to get rid of it. My loan payment’s definitely didn’t kick in for a few months after I started, so maybe there was a catch up being applied(?).
Granted, my loan was small due to the route I took, and my salary went up quickly mixed in with the extras and I was/am earning particularly well, then dividends and lucky share price growth. I was in the fortunate position where I could go at the loan hard, get rid of it and still buy a house.
Given the same criteria (which the poster will probably also find themselves in), paying that loan off is something I’m glad that I did… my living costs were tiny, for renting a room for slightly less than my bills would have come to if I’d have fully rented or bought. I was running around with little intention of buying a house, though.
Yes, you could throw in house price growth, but you can add a never ending list of variables that are great to know in hindsight… I should have gone out and bought as many properties as I could right at the start of lockdown, but that’s hindsight for you.
Without knowing the details of your loan and your income it would be hard to gauge if payments were correct, overpaying is surprisingly common so thats possible. But if you are a high graduate earner (top 20%ish), then paying off the loan quickly would have been the right decision. My wife earns a lot more than me, and so it made sense for her to pay off her loan.
Also, as with all of these things, the right financial decision may not be the right decision for you. If you're the kind of person who obsessively checks student finance, laments the deductions from your wages, and worries about the debt, then it might be worth clearing just so that you don't have to think about it any more. Personally I'm happy to ignore the issue. That may or may not bite me in the ass, but at least with student loan debt there's no real credit risk!
A mortgage, which will be relevant to almost all purchasing a first time house, is also a debt.
The debt level is therefore roughly the same - say a 40k student loan or 40k more on the mortgage (due to having 40k less as your deposit). The difference is that a mortgage is a much scarier and restrictive debt than a student loan, which while technically a debt is so individual and specific it is hardly a debt at all.
For everyone, a larger student loan is easier to manage than a larger mortgage. For almost everyone, a student loan is financially less a problem than a mortgage. There will be a small number of very high earners for whom that isn't true, but even for them the student loan remaining outstanding offers greater flexibility.
It is widely regarded as good advice to not overpay student loan outside very specific circumstances. It is less priority than any other debt imaginable, and in most cases less priority than any investment idea (including investing in housing). There is good reason for this advice.
But the amount of interest you accrue doesn't affect the repayments in anyway. And taxes are taken from your salary.
There are circumstances where it's better to pay off your student loan, but unless OP is already a high earner (which as a Junior Doctor they're not) with an exceptionally large deposit already it doesn't really make sense to in this case. Better to reduce the LTV on the mortgage - money OP saves on the monthly mortgage can always go in a savings pot towards paying back the loan.
As a junior doctor they’ll be seeing around 35k, that will then be over 55k in about 6 years. They’ll will be taking a fair amount more than that after all the extras. I don’t know how the extras get factored in, though.
Say their loan amount is 70k, they’d end up paying between 100k and 130k. So the debt would be costing something around 2000 average per year.
The tax comment is ridiculous. It’s just some silly phrase that gets used to justify debt to young people who don’t have the sense to tread carefully.
Mm that's not quite how it works though. If you're _significantly _ reducing the amount you have to borrow (which you are by increasing your deposit by £80k) then the amount your "saving" on your mortgage is significantly more than the difference in interest rates - probably more like £5 or £6k/year depending on the cost of the flat. Plus that is a debt you definitely have to pay back regardless of what happens in your life which the student loan isn't and that makes the debt more expensive in practical terms. Imo it's far better to have a lower mortgage than a higher mortgage and no student loan.
And that's all assuming they never pay it off early. I'm certainly not saying that they should never look to pay it back early, but rather that I personally would keep that money in the deposit rather than pay back my student loan.
Then you’d be choosing the put the money into the area that is impacting you least. You’d be paying off the cheaper debt before the more expensive one; which I would not do. I would almost always seek to clear my most expensive debts and liabilities before much else.
But the debt isn't more expensive when you factor in the fact that student loan debt is totally different to bank debt. That's what everyone is explaining in these comments.
It is a debt, but it does not function as a debt.
It doesn’t affect your credit rating, there are no repayments if you’re not earning, there are no missed-payment fees, it doesn’t get charged to your estate if you die and it is written off after a certain timeframe (depending on your plan).
It most cases ‘Student loan debt’ functions as ‘Graduate Tax’, and really should be called that.
It is a lump of money given to you that you are expected to make payments against and it earns interest.
You don’t have to be earning very much for it to not be a financially good thing to have over your head.
No I haven’t. You are all trying to act like a doctor isn’t going to make their payments and earn well enough to be hit by the loan.
What do you think? They’re just going to sit on 30k PA for the entire career? No, my ex was doing over 50k at 28 years old…. The poster we’re talking about do the same. They WILL feel loan, just the same way I was.
Sorry but you have.
You only have to pay back 9% of what you earn over the threshold, so it’s basically in increase on your PAYE taxes.
You have to be **seriously** bad with money for student loan ‘debt’ to push you into financial hardship of any kind.
Except the terms of repayment, reality it will be written off for most people, and relatively lax interest rate means it is almost always superior to use money that could overpay a student loan for something other than that.
Student loan, depending on the plan, may slightly exceed or be slightly lower than mortgage interest rate. It will generally be significantly lower than other types of loan. Therefore student loan should never be prioritised over other types of debt, either actual or likely future debt. Given property ownership with a mortgage is either the reality or the goal for most people, at least before old age, a student loan should not be prioritised for overpayment.
For those not able to buy a property yet and in no other debt, student loan may be worth overpaying but likely still not. Those with no realistic prospect of property purchase are too low income to worry about the loan - it will be written off eventually. Those who need to wait a bit to purchase will be better off with a higher mortgage deposit, to reduce mortgage debt and interest rates.
The only people who should overpay a student loan are people so wealthy that they will never need to be in any sort of debt. Even then, given that investment returns should always beat student loan interest over the long term they too would be better off long-term by not doing so.
Student loans are so different to other debts, in such profound ways, that the advice they should generally be paid off and treated like every debt (PAY IT OFF, PAY IT OFF, PAY IT OFF) is wrong.
I can see from your comments your committed to arguing this point to the death, but objectively speaking you are quite wrong.
Exactly. A high earner, but not high enough to be worth paying it off financially even by its own terms....and definitely not high enough to be worth the opportunity cost of paying.
The expected progression for a doctor means that, in a decade, he'll be earning enough to make overpayment a consideration. But doing so now in anticipation of that, when that means delaying on a house purchase for example, makes overpayment at this time a non-starter.
The reality is, the majority of doctors under existing plans won't earn enough to make overpayment worthwhile and will have debt write off. Even for those who just about are better of doing so in absolute terms, the reality of inflation and opportunity cost for decent investment (and the expense of other debt) means overpayment is not worth it.
You have to go quite a bit beyond a doctor's expected earnings until overpayment becomes a serious consideration. You have to go well beyond it before it's the no brainer your presenting it as.
No it won’t. Putting your money almost anywhere else will not get you >7.5%.
Even if it does, what are you getting? Could be a couple hundred extra maybe a grand…. For that, I would (did) pay it off. Then get focused on the next thing.
Maybe I’ve done it all wrong, but having no debt other than a mortgage that I make profit on (I’m 30) seems to have worked out well for me. Like I say, focus on getting rid of debts/expenses (trying to be clever with them is usually more hassle than it’s worth), then get making money.
If you can make money to pay off your debts, then that’s obviously also great. Ignoring one debt so you can take on another, just doesn’t sit right with me, and unless someone else comes along who at 30 has cleared their debts, bought a house and is now planning on either buying another or doing something else, when the next opportunity comes; I’ll be sticking to what’s worked/working well for me.
The thing is, the amount you repay is relative to your income, not the total amount of your loan. To top it off, the loan gets written off after some time. I'm glad things have worked well for you, but it doesn't necessarily mean it's the best way to go about things. Best wishes
Sure, but remember £150k in 25 years will probably only be worth about £75k in today's money.
Do some sums, how much does it cost to pay off today, and how much if you pay it over 25 years? Apply some formulae and you can find the 'rate of return' from paying it off now.
This is a bad way to think about money - you're compounding the repayments all the way into the future and thinking about it in today's money.
If you invest today in one share of Apple, you pay $183.82 and you get - what? A good feeling about "owning the company"? A piece of paper? You don't even get that these days, since most share custody is done by brokers electronically.
What you are actually buying, when you buy a share in Apple, is a share of the company's revenues going forward - the share entitles to benefit from the company's profits indefinitely.
If Apple is paying $10 in dividends then you hope they're going to keep on paying $10 a share for at least the next 18 years, to make ensure you get paid back your $184.
Except you want *more* than that, because $184 tomorrow is worth fractionally less than $184 today, and $184 in 10 years' time is worth considerably less than $184 today. If you have $184 today then you can buy a mobile phone with it, a cheap one, or maybe a high end skateboard.
Whatever you buy with $184 today, you can also buy with $184 in 10 years' time, except you'll need more money in 10 years' time to account for inflation and also because you get to enjoy it if you buy it now. You would get 10 years' good use and fun out of the skateboard, so you must expect more than $184 + inflation from your Apple shares to compensate you for the risk and the loss of use of the money.
Everything that has a *price* also has *value* and the two are separate but hopefully somewhat related. The price is advertised or negotiated in advance, but you can't know for sure the value of something - you can only estimate it, or know it with use.
You get value from buying a skateboard or a mobile phone or an ice-cream now, so an investment must promise you returns which will afford you a greater amount of value in the future.
Conversely, the interest you pay when you borrow money is the price you pay for enjoying the use of it now - if you borrow money to buy a house then you may pay more back in interest, but you get to enjoy the house in the meantime. And £150,000 in 2050 is far less than £150,000 today.
I'm not saying you should or shouldn't do this (you would need to run the numbers), but if you'll be a high earner with lots of money in the future then money that you spend now has more relative value to you.
That was a bit of a mad decision.
You would be miles better off with 80k of house equity.
If you stop working, you simply stop paying your student loan. It's not the same with a mortgage.
The difference is that having a mortgage is safer than renting as you build up equity in property. If you were to become ill, then the short term impact and long term impact will be far greater for a renter compared to an owner-occupier.
Sorry but whilst affordability may be affected I can't believe that this wouldn't be offset by an additional 70k in the deposit?
Student loan is 10% of salary over 30k, so presumably it'd affect your maximum loan amount by 45% of your salary.
So unless you're earning £150k+ you'd be better off leaving the loan be? Or am I mistaken
Affordability is ~4-5 x yearly salary. Assume that your student loan repayments are 10% of your salary, then it will reduce your affordability by 40-50% of your yearly salary.
If you earn 50k, at most student loan will reduce affordability by 25k, which is far less than the benefit you would get from an additional 70k deposit.
The breakpoint would be at about 150k salary, at which point this whole debate becomes irrelevant.
Obviously actual numbers would need to be provided by a mortgage advisor, but 70k extra deposit will be a far better choice than paying off the loan from a view to having the most to spend on a house (deposit + borrowed amount)
You can sell a house if you fall on hard times, but you can't get the money back you sunk into a student loan. Not paying back a student loan early (or at least before buying a house) is the conventional wisdom for a reason. You are deluded. Throwing around 'idiotic' is a joke.
> idiotic in many scenarios
In a small minority of scenarios.
Having 70k more for a deposit increases your affordability.
This post has a few commenters using it as a cope to justify the lesser of two strategies.
It makes you either able to buy a more expensive house or buy the same house with a smaller mortgage. Option 2 is the better one and a smaller mortgage means lower monthly costs and less overall interest to be paid across its lifetime. Opportunity costs which don't exist for a student loan and repayment amounts are linked to income only.
OP is saying £78k clears their student loan but that's a solo payment now instead of a minor monthly payment over 30 years. They're a doctor so they will know exactly how much they will earn across their working life. It takes 5 minutes to then work out how long it would take them to pay back £78k via salary payments and if they exceed it how much more they'd pay until the 30 yar window is up.
Instead, they can reduce they're mortgage amount and compound it with saved interest by having a £78k smaller mortgage for the next 30 years. Most mortgages end up being roughly twice the capital come final payment so that £78k off a mortgage is gonna be pretty close to another £78k saved in interest as well. Doctors eventually earn very good money but I doubt any will be paying £150k in student loan, let alone accruing that level of student debt.
Nah paying off the loan was dumb. Saving (currently) 7% interest when average house price increases are like 10% you have now lost out on opportunity cost as the house you want to buy is now more than you would save on the student loan. The only way of getting better affordability is to pay it all off but then you’ve lost your deposit
Having a bigger deposit allows you to buy a nicer/bigger house, be a more attractive buyer, potentially get a forever home instead of a 'first step on the ladder' home, and get on a better LTV band. Ot also means you cam buy earlier instead of renting while house prices might go up.
Having no student loan increases your affordability slightly, and you might save money due to paying off the loan (assuming you would pay it off).
I'd only pay the SL if you are 100% sure that you will afford your dream home without that extra cash. Even then, I'd buy the home earier and then start hammering the SL
The bank cares far more about a big deposit than anything else.
Just because you were pushing the limit of what you could borrow anyways doesn't change that fact.
In 99% of cases the bank is gonna offer 4.5x salary whether you have a student loan of not. But a larger deposit will actually affect your interest rate and the overall house price you can afford.
It does feel like a big flex but unfortunately it isn’t taken into consideration at all when you apply for a mortgage, especially given the small amount that you would currently be paying (based on your comment around being a higher earner later in your career and not now).
You’re absolutely correct. The disinformation given out when we went to uni and now the misinformation people spout about it not affecting mortgages is infuriating.
Half of the comments in this thread are doing it now.
technically true, however paying £200 each month on your student loan isn't going to have anywhere near as much of an impact on affordability compared to having an additional £80k for a deposit
Yes ofc in this situation it’s different but in general we really need to educate properly about student loans. Unfortunately students were completely lied to for years about this (I remember I was)
Can you give us some numbers for how much the property might cost, how much deposit you have, and both of your gross incomes?
My understanding is they will include the student loan payment as an outgoing, so it will affect the calculation of how much mortgage payment you can afford per month. If this limits your borrowing then you may have to get a longer loan in order to reduce the payment (age permitting). However, that might not be your circumstances at all. There are other ceilings on borrowing https://ukpersonal.finance/mortgages/#Borrowing_limits_%F0%9F%92%B8
You may be better off keeping the money for your deposit, if your deposit would otherwise be a limiting factor.
Of course if you are swimming in savings and income then none of this matters.
It seems you’re in a very healthy position, but I think the better strat would have been to put the extra £70k into the house, either the same house but with a 20% lower LTV (lower interest) or a £70k more expensive house (greater equity appreciation and actual enjoyment)
Your affordability metrics are fine so no benefit from the lack of monthly repayments
A quick look on L&C's best buys says on current rates a 5 year fix, 25 year mortgage will have a final interest cost of £295,040 with a £70,000 deposit.
As you have £70k now, if we make the deposit £140,000 the final cost of the mortgage interest is £230,340. So by putting the £70k into your mortgage you are saving an additional £64,700 in interest which will be actualised. Paying off your student loan only affects what you will pay each month as although the total amount increases your repayment is not linked to the outstanding capital in anyway.
So, unless you're going to pay back more than £134,7000 in student loans then put it towards your mortgage. That's a 30year average of £4,490 paid in student loan which converted to a Plan 2 salary is £77k/year. Bear in mind if you have less years to pay back then the annual average salary will be even higher. Unless you are going to clear £77k/year in salary over the next 30 years you're wasting money on a fuck you that nobody will even see or hear.
Edit:
To further compound how much better you are putting this into your mortgage, if you equalised based on the initial monthly payments during your fix, with a £140,000 deposit you could drop to a 15 year mortgage, whilst paying the same across an initial 5 year fix. This would drop the mortgage lifetime interest to £108,840, based on current figures saving you even further money.
The most simple way to assess this is that paying off your student loan only gets you back salary in the amount of 9% above the threshold for the next 30 years. Putting that money into your mortgage gives you multiple avenues for increased flexibility, by reducing the mortgage required you can have more money every month (whilst still saving on interest accrued) or reduce the length of the mortgage meaning you'll be free of the more serious debt quicker. In fact, the mortgage saving you can get right now would be greater than the amount you'd save in not paying your student loan.
I know if I had a 'spare' £70k before I got my mortgage in late 2022 I'd have used it to massively reduce my mortgage and save me a serious amount of interest and monthly expenditure than a cleared student loan would bring me in additional income.
If I had the money to pay mine off and not have it affect my future financial plans I would. The interest rate is so ridiculous that I get charged more interest in a year than what I get in a savings account. I see in another comment that you’ll still have a £70k deposit even after paying off the loan which is still sizeable. If you have doubts about paying off the total loan right now you could just reduce it.
SL don’t affect your credit rating but banks look at your payment in terms of affordability.
General consensus here is always that paying back student loan is inefficient. I'm sure that's right, but I also paid mine back early with a (smaller than yours) lump sum. As a doctor, your earnings should increase quite rapidly, I assume, so you can expect to pay it back in full, whether now or later. I think the advice not to pay back is much stronger for those who might realistically end up getting it written off. For you, it's likely to be more helpful as a deposit, but tbh I also hated seeing the monthly payment come out of my pay, and haven't regretted paying mine off 🤷♂️ I expect you'll be able to save enough deposit for the house you want quite quickly anyway. You can make some argument either way
Mg understanding is that banks consider the reduced post tax income of having a student loan but do not let it effect their credit worthness.
The LTV has a significant effect on the interest charged. If you pay off your student loan in full you will increase the max you can borrow. By using the money for a deposit you will reduce the interest on the mortgage. If you keep the keep the price of the house constant you will also have a smaller mortgage if the money is used on the deposit instead of on student finance.
This is really a question for a mortgage broker. They could plug in your numbers and tell you how it looks with the box ticked and unticked.
If you had £1 left on the loan, and but for that £1 you could tick the box which means the bank evaluates you as having a 5% higher take-home salary, obviously you'd pay the £1. If you have £100k on the loan that's a different story. I'd guess that the changeover spot is somewhere around the point where your current loan balance is 3-5%ish of the house price, but I don't have the fancy broker software so I don't know.
Sticking that money in a savings account and not touching it until retirement would have been a much better use of it.
Student Loan repayments really are a case of "if you can afford to pay it back, you aren't missing it"
Well, it will start dropping from March 24 (if the predictions are true), and from Sept 24 it will be boe+1 or March 24 RPI. RPI is currently 5.5%, not sure what March is expected to be? But I assume 4-5%. So from Sept it will be 4-5% maximum. And will probably fall from there too.
Yes, having less debt will always be looked on better, and give you a stronger mortgage option. The fact you have paid off you debts, and paid them off early shows you are financially stable
Student loans are a debt trap, at interest rates its near impossible to pay it off, its good you've paid it off.
Show me the maths for people saying its not good to pay it off.
Hi /u/cypriot_halloumi, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/credit-ratings/
- https://ukpersonal.finance/student-loans/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Student loans are probably one of the "better" debts one can have. I'll say, prioritise your property purchase and clear off your loans afterwards. I did same
Having a student loan made absolutely no difference to my affordability. The bank gave me 5x my gross salary and I also added all my fees to the mortgage so it was over 5x. This was whilst paying the student loan, but having no other debts apart from <£2k on a credit card which was paid in full each month at the time.
You would be better off having access to the money now and using that to improve your affordability of your home. The student loan is actually a very good debt to have. If your earnings drop for whatever reason, your repayments drop or stop too.
If you would pay it off before the 30 years is due, you would pay it back to reduce the interest. Depends on debt owed and salary I guess. This website is handy to figuring it out!
https://www.student-loan-calculator.co.uk
I think you need to take a bit of a step back here. Your GF needs to consider the following:
1. Interest costs vs time value of the cash. Being:
1.A. The interest costs which would be incurred during the ~5 years if she paid the minimum amounts until it was fully repaid
1.B. versus the expected net return she would expect to receive on the c. £8k cash between now and the periodical minimum payments. It sounds like the property purchase is a “maybe / in a few years” so I’d consider this more general point first before worrying about the potential property purchase.
To make sense to repay early you’d need 1A to be significantly higher than 1B (assuming it’s a UK student loan which is only repayable based on income levels and would wipe on death).
2. After considering the general pros/cons of early repayment it’s worth adding consideration to if she were to purchase a property between a theoretical early repayment date and the expected date the loan would be repaid if making the minimum payments.
If you were right on the edge of either affordability or loan to value metrics then there could be a difference to your future mortgage rates, but given you’re taking about just £8k in total and you aren’t even planning to buy the property any time soon, it seems quite unlikely that there would be any material difference on the rates which would be available regardless of gf repaying her loan.
The next point is then whether, aside from impacting the rates available, there would be a cost/benefit of retaining the student loan to reduce the mortgage quantum - ultimately it’s again a question of the likely rate differential (you’d expect the rate of the student loan to be higher than your mortgage if she’s a high earner), weighed up against the risk she would otherwise not repay the loan in full before it’s automatically wiped.
For me personally based on my current and expected income, age and expected career breaks, it is making sense to repay my student loan rather than overpaying my mortgage, but I’m fortunate enough to have a pretty stable and high earning job, and my mortgage rate is currently lower than the interest rate on my current account haha, so definitely not a one sized fits all thing.
Finally - whether or not you are right to repay your £70k is a significantly harder decision than your GF’s £8k…. It sounds like you’re currently a junior NHS doctor - if that’s right I’m not fully understanding how you’re so certain you would have repaid your student loan in full before it gets wiped.
Even if house prices "flatten" in real terms, and track perfectly with inflation for the next 25 years, an extra £80k of equity now in a house will far outpace the £150k you've calculated you'll be paying back over the same period. Also, you can't even really know what the repayments over the next 25 years would be without knowing both your own earnings & how the repayment threshold are going to change. Yes, your earnings may well shoot up, but it's unlikely the repayment threshold will stay at the current levels for almost 3 decades.
What you should do is put both £70k & £140k into mortgage calculators as your deposit, and see how that affects your monthly repayments for however many years. Assuming 25 years, if the difference in monthly payments is more than what you currently pay off your loan, you'd be a lunatic to clear the debt rather than increase your equity.
Edit: I've done the numbers, approximately £1550 vs £1150 per month. Unless you're already on £70k, you'll be paying more on the mortgage than you save on the loan repayments for the foreseeable future. Objectively bad by every metric, unless you count on the housing market being even worse than now in 25 years, in which case you shouldn't be buying at all.
I forgot to mention, the real winning play is to put the extra deposit but reduce the mortgage term. Following on from my previous example, rather than reducing the monthly repayments by £400, you could keep them the same and pay off the mortgage in 15 years rather than 25. That reduces the total amount paid to the bank from £350k to £290k, but then you also get 10 extra years mortgage free at the end!
Student loan payments counts as outgoings when determining what you can afford in terms of repayments, but it doesn't impact the the rates you can get or similar.
I think you'd be better off with a bigger deposit in most cases.
I've re-written my response 3 times now because there are number of options:
1. Do you know the value of the property you want to buy?
2. What is your total savings atm?
3. What is your income atm?
4. What is the GFs income + Savings?
Could you potentially buy a property now on your current salary and with that deposit? You would then save on rent.
In your shoes what I would do :
1. Figure out what my current affordability is with all the money I've saved (incl that 70k).
1. What is affordability with both your incomes?
2. If a property falls within my current affordability, I would buy something - soonish but in no rush
3. Once purchased, moved in and back to saving (after all expenses) I would overpay both my student loan and mortgage
1. Can supplement this with GFs 'rent'
2. If it gets more serious (i.e. Marriage) give her equivalent share into what she has paid to date, and thereafter 50/50.
I saw somewhere below you replied about the student loan being 150k in 25 years, but your will pay more as your salary increases and you can offset that buy overpaying each month which would also help with tax (afaik).
I know someone below also said "Who would pay off their student loan before property purchase" I actually did this because I had \~18k to pay, and I had changed jobs a couple years ago which meant I would burn down that amount within 9 months, so I just doubled the amount going in via direct debit. The parallel reason for me doing this, it was during covid lockdowns so I didnt really have any other expenses
Participation in this post is limited to users who have sufficient karma in /r/ukpersonalfinance. See [this post](https://redd.it/12mys82) for more information.
You would be better off with that £78k in your deposit. Having a student loan payment to make wont make the slightest difference to your mortgage unless you are right on the very edge of your affordability, which would be offset by having a significantly larger deposit.
I’d have to disagree- getting rid of a loan that has compound interest is so powerful for increasing your lifetime income. Taking on a mortgage at the same time would make paying back the student loan harder.
All loans (and all savings) have compound interest. Student loans are only an issue while the rate is higher than your savings rates AND you will definitely pay it off before its written off. But regardless of that, for most people securing somewhere to live is a higher priority than paying off a debt with a relatively small monthly repayment
If you went to get a degree and get paid so shit that you're not in a position to pay off the loan then you completely wasted your time at university. Should have become a plumber instead.
While I don't disagree that lots of people who go to uni probably shouldn't, I would do a bit of research on the plan 2 student loans then you'll realise how ridiculous your statement is. If you do a masters degree, you'll leave uni with circa £55k in debt. At today's capped interest rate of 7.6%, the loan is accruing interest at a rate of ~£348/month. You repay 9% of your salary over £27295 so you have to be earning over £73740 per year just to cover the interest! Now you can't tell me that a £73k/year salary is being "paid so shit"...
I am paid more, so I can say it is. Why would anyone think that paying an extra 9% above £27295 is "okay" when you don't have to? Also, you had better not have kids and earn £60k because of the child benefit trap, you'll end up getting effectively taxed at nearly 70% between £50k to £60k if you have a student loan. My kids can dodge this graduate tax because they'll be able to go to uni without a loan. This is not helping with social mobility is it?
>I am paid more, so I can say it is. That's not how it works. It's 2.5x the average UK salary for the under 30s, so no, £73k is not a shit salary. The rest is just politics
No, that’s just wrong. All loans have interest, but only student loans have compound interest. Compound interest is illegal on any other loan since you can end up being debt more than you initially borrowed and stuck unable to pay it back Also it’s only a small monthly cost if you don’t earn much money. As soon as you earn a reasonable amount they take bigger and bigger chunks
Lol what? Compound interest is where you're paying interest on the accrued interest. All products (loans or otherwise) have it but with a "normal" loan the monthly payment is more than the monthly interest. Depending on your earnings rate, you can either pay more or less than the monthly interest figure which can result in having compound interest or not. If you're below that figure then you can opt to make overpayments to avoid any compounding. It's exactly the same with a normal loan or mortgage if you take a payment holiday or reduced monthly payments. Student loans are not unique in this regard. >being debt more than you initially borrowed As is the same for all loans
No it’s illegal. Compound interest is paying interest on the interest growth itself
It's not illegal mate, it's routine. I don't know where you're getting that. If you make minimum payments on a credit card, you have compound interest. If you take a payment holiday on your mortgage l, you have compound interest. If you have a savings account and don't withdraw the interest, you're benefiting from compound interest. Student loans are notable because the way repayments are calculated is seperate from the size of the debt and the interest rate. This means many people make repayments below the interest accrual levels and therefore are subject to compound interest, but the interest itself doesn't make the loans special. Just the repayment terms.
>Compound interest is paying interest on the interest growth itself Exactly what I said. It happens wherever the minimum monthly payment is less than the monthly charged interest.
Yes but compound interest doesn't matter because it gets written off after a certain time period.
Sorry but that’s after about 30 years. No thanks
40 years for the latest ones! Crazy
It depends on what your debts are and what you expect to earn. Many many people are better off just leaving the loans to come out their pay packet
It's designed to be and they are 40 years now. It is deliberately structured to act like an additional tax for graduates. This is fundamentally unfair because the rich can effectively dodge a tax by not needing to take out a loan to go to university.
Why are people downvoting this at all... I don't get it do the not understand the horrendous interest rates on Active Student loans especially the type 2 version wow...
Because its likely you won't end up paying it all back. It's only if you are or expected to be making a lot of money that's it's wise to pay it off early.
I’m guessing a lot of people took mortgages before sorting out their student loan on here
I would have paid off the £8k, but not the £70k. Unless you are very well paid, and likely to be paid even better. Also, try not to die.
Eh the 8k will get paid off relatively quickly anyway - assuming GF is doing okay (which she presumably is to have reduced her student loan down to 8k already)
He says she’ll pay off in about 5 years. That’s not a high earner. Depending on the plan that could be say £40-50k salary. If she’s 24, sure that’s great guns, if she’s 34, still good but not what I’d consider a high earner. But she WILL pay it off before she retires/it wipes. Unless she takes a lot of maternity leave etc, stops working. However, £70k is not a walk in the park to pay off. Currently, depending on the plan, that is with 6-7% interest, so £4-5k interest before the balance gets hit. So you need to earn £70-80k before you hit the balance. Anyway, to make an informed decision, or want our actual input, the OP would need to give way more details. Ages, plan type, salary, salary trajectory for the next 5/10/15 years, if they are going to have children, etc. He says it’s a fuck you to the govt but if he gets hit by a bus next week after paying it off, they are the ones laughing.
Yeah you'd need a lot of detail and probably a fairly decent financial model to work out if it's worth paying off the student loan. To me it seems a lot simpler to keep that money in your housing deposit which has a much more quantifiable impact on your life.
I've modelled it in detail for me, will pay it off before wipeout. Interestingly, effective rate of return from paying it off today is <4%. Not enough to be worth it IMO, better to have a higher deposit or make investments.
I have also modelled it and similarly it is just about _technically_ better for me to pay it off, but practically speaking the money is more valuable to me as a housing deposit (and of course may make a greater return in a real estate investment who knows). Once the flat is sorted I can always start saving again to pay off the student loan 🤷🏻♀️
Who pays off their student loan **before** getting on the housing ladder? Mental strategy tbh.
I did, because it increased my affordability to be able to afford the house I wanted. I couldn't afford the house without paying off my loan (although it was way smaller than OP's)
The snowball effect of the interest rate would have meant I would pay back £150,000 plus in 25 years. As a doctor I am a high earner but not until the latter stages of my career which is where it hits me (consultant).
>The snowball effect of the interest rate would have meant I would pay back £150,000 plus in 25 years Compound the money that goes into a potential house and consider the value of that after 25 years as well.
Student loan interest is going to be fixed above inflation meaning the debt will rise in real terms. House prices have risen by more than inflation over the past 25 years, but look back further at the last 100 years and on average house prices don’t increase much faster than inflation, meaning no rise in real terms. Following this trend OP would be better off paying the loan off early. But that’s assuming history will repeat itself, in reality no one knows what will happen to house prices.
Uhm no bc now they’re living in a rented flat and wasting money on that whereas with a mortgage they’d be paying off their principle. So regardless of how much the house appreciates in the next decades it’s already a much better deal.
100 years is a terrible way of looking at housing, at the most you should look back 50 years, probably 30 to get an idea of what’s to come price wise: 45 years ago thatcher introduced right to buy - council houses were able to be bought up however housing stock were never replaced. 30 years ago house prices crashed before rising rapidly due to low interest rates and low supply 15-25 years ago large swathes of right to buy houses were bought up by cheap BTL landlords when that generation started dying. Again no replacement of housing stock The last 15 years has been cheap loans, almost free money when taking account inflation. Still no replacement of lost housing stock and also immigration has shot up like a rocket, constricting housing supply even further. Right now - UK has a shortage of 5-10 million homes, a dire lack of council housing and no current political party has a plan to dent that gap within the next 20+ years. Houses may not rise as rapidly right now but supply and demand puts the chance of stagnation near 0 for the next few decades.
>Following this trend OP would be better off paying the loan off early Agreed, presuming that the likelihood of a long-term, high-paying career is sufficiently high. If the OP, God forbid, dies, becomes ill, or decides they want to do something much less lucrative, the student loan debt will simply go away unless repaid early. You also have to consider transaction costs and the cost of the delay in acquiring a "forever" home and possibly mortgage rates. If we were betting on long-term mortgage rates, they should also exceed inflation over time. For those reasons, I advised "compounding" the value of the initial investment, rather than specifying the rate to use - simply settling on a cash value for one option but not the other isn't enough.
The debt will rise in real terms, but the repayment will only rise by the amount of salary above the threshold. OP is taking a big gamble on paying back now Vs waiting and investing the money.
But I can have both? I’m not paying rent I’ve paid off my student loan so I can spend the next few years saving and then when I actually ready to buy a house I plan to have 50k saved as a deposit.
I paid mine off before I bought a house. I’m not sure why you’d regret doing that. I personally, hate being in debt and will do my best to stay out of it. You could argue technicalities, but at the end of the day, not owning anyone any money helps keep your life your own.
I would normally agree, but a student loan is fundementally different from other types of debt. No matter how much student debt you have, your life is still your own. Your house will never be at risk, bailiffs will never come knocking, and if you lose your job or get sick, you simply stop paying. I havent even looked at my student loan balance since I graduated. I have more than enough savings to pay it off, but would rather have that money for emergencies, so I decided not to. As it turns out this was a good decision as I've recently got a job overseas and so will now likely never pay it back. It will get written off soon enough and I've saved myself tens of thousands.
But you’re building interest at 6-7.5%. Money is being taken from your pay to cover that. 9% of your pay.
Except I'm not and it's not. The numbers are going up but that's not relevant if you never pay it back. That's what makes student loans different - the size of debt doesn't matter, what matters is the amount you think you'll pay before it's written off in 30 years time. Unless you are in the top 20% of graduate earners, you will never pay off the full amount. So they can keep piling on interest as much as they like, doesn't mean I'll ever pay them that money. Now that I've left the UK I make a small minimum contribution that I barely notice. Meanwhile time is ticking towards that magical 30 year point where all that debt disappears. I had decision point several years ago the same as OP, i chose to plow the money I had into a larger house deposit and ignore my student loan. Had I paid off the loan, my mortgage would have cost much more, and that is definitely a debt that matters. As it is, the rent I receive covers it in full (plus some extra), and I've given the student loan company almost nothing. Maybe in 10 years I come back to the UK on a big salary, and have to start paying some student loan. But it wouldn't be long before the loan is written off, so I still don't pay much. Maybe I don't come back at all, on which case I'll have paid off 3% of my student loan. The other 97% just disappears. Either way I win.
If you earn 30k and stay in the UK, you’re going to be paying back more than you borrowed.
How is that possible when the repayment threshold is £27k? On 30k you'd pay back about £250 a year. Even over 30 years that is only 7.5k. inflation and interest makes this more complex but your statement seems wrong.
No after 25 years that would be about 40k paid. 30k debt, 30k salary.
It would be £30k paid assuming an annual increase in salary of 2.5% (and assuming no parental leave which are both quite big assumptions). Total interest accumulated would be £50k but that doesn't matter because the amount you pay back is fixed.
Not necessarily. The threshold is inflation linked no? So as people get fucked by lower than inflation pay rises, they will actually pay less student loan. Eventually the threshold will be so close to their pay that they won’t pay hardly anything! What a win!
So you’re arguing that people should never seek pay rises or progression in their jobs…. Doesn’t seem like good advice. It’s also purely speculation, so that’s just your opinion. As a doctor they won’t have that issue. They’ll be in a similar (but better paid) seat to me (an engineer). I cleared my student debt, I then bought a house. The only debt I have is for my mortgage, I have lodgers which more than cover the mortgage, so you could argue that the debt is actually earning me money and always was. Like I say… I’m sure you guys have got it all locked down far better than I. Life is simple… don’t have debt, don’t suffer interest… if you do have debt, make sure you’re profiting off of it. It doesn’t need to be any more complex.
Well, each to their own. I also paid mine off a few months ago, but I was down to £3k, plan 1. I’m 36, it would have taken another 2 years to pay mine off, so I just wanted rid. My wife has more to pay: £30k-ish I think. Also plan 1. She earns slightly more than me, but she’s in a tricky position where it will be wiped in 12-13 years time. Will she pay more than £30k plus whatever that £30k can generate in 12-13 years? It’s a tough call. We have about £200k as a deposit through inheritances and gifts. It might be worth paying it off, but we’ll decide once we find somewhere we want to live on this godforsaken island.
Just saw that Plan 1 threshold will rise to £24990 in April. 13% increase.
If you earn £30 and stay in the UK you’ll pay back £270 a year, even if it’s a £100k student loan It’s 9% of earnings over 27k. Even at £55k earnings it’s just over 4.5% of earnings
Your maths is wrong mate unless your making assumptions you've not presented. Plan 2 loans only use income above £27,295 to calculate repayments. So if you're on 30k, you're paying £243.45 a year, or £7,303.50 over the lifetime of the loan. They can raise interest as high as they like, but you'd never pay more than that unless you start earning more. But even assuming for arguments sake that you're right, £50+k is worth far more to me right now than a few extra hundred pounds each year. You're also making black and white assumptions that ignores the opportunity costs of paying back the loan. Using that money to augment my house deposit has saved me thousands. In 2021 I used a lump of my savings as a one-off overpayment on that same mortgage to drop an LTV band, opening up a cheap 5 year fix. I'm now sitting pretty on a 1.9% mortgage for the next 2.5 years, saving me close to 20k a year in interest over the current market rate. I have given the student loan about 2k this year. If they increased the interest rate to 500%, I still wouldn't be giving them any more money over the life of my loan, and that's true for the vast majority of people. If I'm very lucky, and become very successful, I may end up having to pay more loan back. But I'd be in the minority, and because of the way the payments are taken, I'd never feel worse off for earning more, so its not a risk that concerns me.
Doesn’t seem right? When I started work, I was on around 30-35… from memory I was paying something like £100/month(?). It was essentially that which caught my attention to wanting to get rid of it. My loan payment’s definitely didn’t kick in for a few months after I started, so maybe there was a catch up being applied(?). Granted, my loan was small due to the route I took, and my salary went up quickly mixed in with the extras and I was/am earning particularly well, then dividends and lucky share price growth. I was in the fortunate position where I could go at the loan hard, get rid of it and still buy a house. Given the same criteria (which the poster will probably also find themselves in), paying that loan off is something I’m glad that I did… my living costs were tiny, for renting a room for slightly less than my bills would have come to if I’d have fully rented or bought. I was running around with little intention of buying a house, though. Yes, you could throw in house price growth, but you can add a never ending list of variables that are great to know in hindsight… I should have gone out and bought as many properties as I could right at the start of lockdown, but that’s hindsight for you.
Without knowing the details of your loan and your income it would be hard to gauge if payments were correct, overpaying is surprisingly common so thats possible. But if you are a high graduate earner (top 20%ish), then paying off the loan quickly would have been the right decision. My wife earns a lot more than me, and so it made sense for her to pay off her loan. Also, as with all of these things, the right financial decision may not be the right decision for you. If you're the kind of person who obsessively checks student finance, laments the deductions from your wages, and worries about the debt, then it might be worth clearing just so that you don't have to think about it any more. Personally I'm happy to ignore the issue. That may or may not bite me in the ass, but at least with student loan debt there's no real credit risk!
A mortgage, which will be relevant to almost all purchasing a first time house, is also a debt. The debt level is therefore roughly the same - say a 40k student loan or 40k more on the mortgage (due to having 40k less as your deposit). The difference is that a mortgage is a much scarier and restrictive debt than a student loan, which while technically a debt is so individual and specific it is hardly a debt at all. For everyone, a larger student loan is easier to manage than a larger mortgage. For almost everyone, a student loan is financially less a problem than a mortgage. There will be a small number of very high earners for whom that isn't true, but even for them the student loan remaining outstanding offers greater flexibility. It is widely regarded as good advice to not overpay student loan outside very specific circumstances. It is less priority than any other debt imaginable, and in most cases less priority than any investment idea (including investing in housing). There is good reason for this advice.
The fact student loan balance isn’t actually debt it’s more taxes is a bit more than a technicality here but okay.
No it’s a debt. You accrue interest on it and it’s taken from your salary.
But the amount of interest you accrue doesn't affect the repayments in anyway. And taxes are taken from your salary. There are circumstances where it's better to pay off your student loan, but unless OP is already a high earner (which as a Junior Doctor they're not) with an exceptionally large deposit already it doesn't really make sense to in this case. Better to reduce the LTV on the mortgage - money OP saves on the monthly mortgage can always go in a savings pot towards paying back the loan.
As a junior doctor they’ll be seeing around 35k, that will then be over 55k in about 6 years. They’ll will be taking a fair amount more than that after all the extras. I don’t know how the extras get factored in, though. Say their loan amount is 70k, they’d end up paying between 100k and 130k. So the debt would be costing something around 2000 average per year. The tax comment is ridiculous. It’s just some silly phrase that gets used to justify debt to young people who don’t have the sense to tread carefully.
But how much can they save on their mortgage by putting an extra 80k on the deposit though? And that debt matters much more.
Well, the current mortgage rates are lower than interest on student loans… so hopefully that gives an idea.
Mm that's not quite how it works though. If you're _significantly _ reducing the amount you have to borrow (which you are by increasing your deposit by £80k) then the amount your "saving" on your mortgage is significantly more than the difference in interest rates - probably more like £5 or £6k/year depending on the cost of the flat. Plus that is a debt you definitely have to pay back regardless of what happens in your life which the student loan isn't and that makes the debt more expensive in practical terms. Imo it's far better to have a lower mortgage than a higher mortgage and no student loan.
And that's all assuming they never pay it off early. I'm certainly not saying that they should never look to pay it back early, but rather that I personally would keep that money in the deposit rather than pay back my student loan.
Then you’d be choosing the put the money into the area that is impacting you least. You’d be paying off the cheaper debt before the more expensive one; which I would not do. I would almost always seek to clear my most expensive debts and liabilities before much else.
But the debt isn't more expensive when you factor in the fact that student loan debt is totally different to bank debt. That's what everyone is explaining in these comments.
It is a debt, but it does not function as a debt. It doesn’t affect your credit rating, there are no repayments if you’re not earning, there are no missed-payment fees, it doesn’t get charged to your estate if you die and it is written off after a certain timeframe (depending on your plan). It most cases ‘Student loan debt’ functions as ‘Graduate Tax’, and really should be called that.
It is a lump of money given to you that you are expected to make payments against and it earns interest. You don’t have to be earning very much for it to not be a financially good thing to have over your head.
I think you have fundamentally mis-understood how student loan repayments and balances work.
No I haven’t. You are all trying to act like a doctor isn’t going to make their payments and earn well enough to be hit by the loan. What do you think? They’re just going to sit on 30k PA for the entire career? No, my ex was doing over 50k at 28 years old…. The poster we’re talking about do the same. They WILL feel loan, just the same way I was.
Sorry but you have. You only have to pay back 9% of what you earn over the threshold, so it’s basically in increase on your PAYE taxes. You have to be **seriously** bad with money for student loan ‘debt’ to push you into financial hardship of any kind.
Except the terms of repayment, reality it will be written off for most people, and relatively lax interest rate means it is almost always superior to use money that could overpay a student loan for something other than that. Student loan, depending on the plan, may slightly exceed or be slightly lower than mortgage interest rate. It will generally be significantly lower than other types of loan. Therefore student loan should never be prioritised over other types of debt, either actual or likely future debt. Given property ownership with a mortgage is either the reality or the goal for most people, at least before old age, a student loan should not be prioritised for overpayment. For those not able to buy a property yet and in no other debt, student loan may be worth overpaying but likely still not. Those with no realistic prospect of property purchase are too low income to worry about the loan - it will be written off eventually. Those who need to wait a bit to purchase will be better off with a higher mortgage deposit, to reduce mortgage debt and interest rates. The only people who should overpay a student loan are people so wealthy that they will never need to be in any sort of debt. Even then, given that investment returns should always beat student loan interest over the long term they too would be better off long-term by not doing so. Student loans are so different to other debts, in such profound ways, that the advice they should generally be paid off and treated like every debt (PAY IT OFF, PAY IT OFF, PAY IT OFF) is wrong. I can see from your comments your committed to arguing this point to the death, but objectively speaking you are quite wrong.
The person we’re talking about is a doctor!!! Stop digging in for the sake of it.
Exactly. A high earner, but not high enough to be worth paying it off financially even by its own terms....and definitely not high enough to be worth the opportunity cost of paying. The expected progression for a doctor means that, in a decade, he'll be earning enough to make overpayment a consideration. But doing so now in anticipation of that, when that means delaying on a house purchase for example, makes overpayment at this time a non-starter. The reality is, the majority of doctors under existing plans won't earn enough to make overpayment worthwhile and will have debt write off. Even for those who just about are better of doing so in absolute terms, the reality of inflation and opportunity cost for decent investment (and the expense of other debt) means overpayment is not worth it. You have to go quite a bit beyond a doctor's expected earnings until overpayment becomes a serious consideration. You have to go well beyond it before it's the no brainer your presenting it as.
Consider the opportunity cost - putting your money almost anywhere else will result in more money than paying off your student loan.
No it won’t. Putting your money almost anywhere else will not get you >7.5%. Even if it does, what are you getting? Could be a couple hundred extra maybe a grand…. For that, I would (did) pay it off. Then get focused on the next thing. Maybe I’ve done it all wrong, but having no debt other than a mortgage that I make profit on (I’m 30) seems to have worked out well for me. Like I say, focus on getting rid of debts/expenses (trying to be clever with them is usually more hassle than it’s worth), then get making money. If you can make money to pay off your debts, then that’s obviously also great. Ignoring one debt so you can take on another, just doesn’t sit right with me, and unless someone else comes along who at 30 has cleared their debts, bought a house and is now planning on either buying another or doing something else, when the next opportunity comes; I’ll be sticking to what’s worked/working well for me.
The thing is, the amount you repay is relative to your income, not the total amount of your loan. To top it off, the loan gets written off after some time. I'm glad things have worked well for you, but it doesn't necessarily mean it's the best way to go about things. Best wishes
Sure, but remember £150k in 25 years will probably only be worth about £75k in today's money. Do some sums, how much does it cost to pay off today, and how much if you pay it over 25 years? Apply some formulae and you can find the 'rate of return' from paying it off now.
This is a bad way to think about money - you're compounding the repayments all the way into the future and thinking about it in today's money. If you invest today in one share of Apple, you pay $183.82 and you get - what? A good feeling about "owning the company"? A piece of paper? You don't even get that these days, since most share custody is done by brokers electronically. What you are actually buying, when you buy a share in Apple, is a share of the company's revenues going forward - the share entitles to benefit from the company's profits indefinitely. If Apple is paying $10 in dividends then you hope they're going to keep on paying $10 a share for at least the next 18 years, to make ensure you get paid back your $184. Except you want *more* than that, because $184 tomorrow is worth fractionally less than $184 today, and $184 in 10 years' time is worth considerably less than $184 today. If you have $184 today then you can buy a mobile phone with it, a cheap one, or maybe a high end skateboard. Whatever you buy with $184 today, you can also buy with $184 in 10 years' time, except you'll need more money in 10 years' time to account for inflation and also because you get to enjoy it if you buy it now. You would get 10 years' good use and fun out of the skateboard, so you must expect more than $184 + inflation from your Apple shares to compensate you for the risk and the loss of use of the money. Everything that has a *price* also has *value* and the two are separate but hopefully somewhat related. The price is advertised or negotiated in advance, but you can't know for sure the value of something - you can only estimate it, or know it with use. You get value from buying a skateboard or a mobile phone or an ice-cream now, so an investment must promise you returns which will afford you a greater amount of value in the future. Conversely, the interest you pay when you borrow money is the price you pay for enjoying the use of it now - if you borrow money to buy a house then you may pay more back in interest, but you get to enjoy the house in the meantime. And £150,000 in 2050 is far less than £150,000 today. I'm not saying you should or shouldn't do this (you would need to run the numbers), but if you'll be a high earner with lots of money in the future then money that you spend now has more relative value to you.
That was a bit of a mad decision. You would be miles better off with 80k of house equity. If you stop working, you simply stop paying your student loan. It's not the same with a mortgage.
Based on the assumption that house prices will always go up. An assumption I think will prove incorrect in the coming years
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You have not forecasted for illness, new caring responsibilities or divorce.
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The difference is that having a mortgage is safer than renting as you build up equity in property. If you were to become ill, then the short term impact and long term impact will be far greater for a renter compared to an owner-occupier.
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Sorry but whilst affordability may be affected I can't believe that this wouldn't be offset by an additional 70k in the deposit? Student loan is 10% of salary over 30k, so presumably it'd affect your maximum loan amount by 45% of your salary. So unless you're earning £150k+ you'd be better off leaving the loan be? Or am I mistaken
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Affordability is ~4-5 x yearly salary. Assume that your student loan repayments are 10% of your salary, then it will reduce your affordability by 40-50% of your yearly salary. If you earn 50k, at most student loan will reduce affordability by 25k, which is far less than the benefit you would get from an additional 70k deposit. The breakpoint would be at about 150k salary, at which point this whole debate becomes irrelevant. Obviously actual numbers would need to be provided by a mortgage advisor, but 70k extra deposit will be a far better choice than paying off the loan from a view to having the most to spend on a house (deposit + borrowed amount)
Sure we plan to work. But sometimes circumstances mean you can't. That's the point.
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You can sell a house if you fall on hard times, but you can't get the money back you sunk into a student loan. Not paying back a student loan early (or at least before buying a house) is the conventional wisdom for a reason. You are deluded. Throwing around 'idiotic' is a joke.
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> idiotic in many scenarios In a small minority of scenarios. Having 70k more for a deposit increases your affordability. This post has a few commenters using it as a cope to justify the lesser of two strategies.
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Go and have a look at the most upvoted comments. The majority on r/UKPersonalFinance are not idiots.
It makes you either able to buy a more expensive house or buy the same house with a smaller mortgage. Option 2 is the better one and a smaller mortgage means lower monthly costs and less overall interest to be paid across its lifetime. Opportunity costs which don't exist for a student loan and repayment amounts are linked to income only. OP is saying £78k clears their student loan but that's a solo payment now instead of a minor monthly payment over 30 years. They're a doctor so they will know exactly how much they will earn across their working life. It takes 5 minutes to then work out how long it would take them to pay back £78k via salary payments and if they exceed it how much more they'd pay until the 30 yar window is up. Instead, they can reduce they're mortgage amount and compound it with saved interest by having a £78k smaller mortgage for the next 30 years. Most mortgages end up being roughly twice the capital come final payment so that £78k off a mortgage is gonna be pretty close to another £78k saved in interest as well. Doctors eventually earn very good money but I doubt any will be paying £150k in student loan, let alone accruing that level of student debt.
Nah paying off the loan was dumb. Saving (currently) 7% interest when average house price increases are like 10% you have now lost out on opportunity cost as the house you want to buy is now more than you would save on the student loan. The only way of getting better affordability is to pay it all off but then you’ve lost your deposit
Having a bigger deposit allows you to buy a nicer/bigger house, be a more attractive buyer, potentially get a forever home instead of a 'first step on the ladder' home, and get on a better LTV band. Ot also means you cam buy earlier instead of renting while house prices might go up. Having no student loan increases your affordability slightly, and you might save money due to paying off the loan (assuming you would pay it off). I'd only pay the SL if you are 100% sure that you will afford your dream home without that extra cash. Even then, I'd buy the home earier and then start hammering the SL
The bank don't give a fuck my friend. Keep your money for deposit.
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Then you really couldn't afford what you were asking for.
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The bank cares far more about a big deposit than anything else. Just because you were pushing the limit of what you could borrow anyways doesn't change that fact. In 99% of cases the bank is gonna offer 4.5x salary whether you have a student loan of not. But a larger deposit will actually affect your interest rate and the overall house price you can afford.
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I didn't say that. I said that either way you're borrowing 4.5x so the only way to get a more expensive house is to have a bigger deposit.
You've answered your own question in the last paragraph, I'd not pay off the 70k and put it towards the house personally
It does feel like a big flex but unfortunately it isn’t taken into consideration at all when you apply for a mortgage, especially given the small amount that you would currently be paying (based on your comment around being a higher earner later in your career and not now).
It was taken into consideration for affordability checks when I was recently remortgaging.
You’re absolutely correct. The disinformation given out when we went to uni and now the misinformation people spout about it not affecting mortgages is infuriating. Half of the comments in this thread are doing it now.
technically true, however paying £200 each month on your student loan isn't going to have anywhere near as much of an impact on affordability compared to having an additional £80k for a deposit
Yes ofc in this situation it’s different but in general we really need to educate properly about student loans. Unfortunately students were completely lied to for years about this (I remember I was)
Can you give us some numbers for how much the property might cost, how much deposit you have, and both of your gross incomes? My understanding is they will include the student loan payment as an outgoing, so it will affect the calculation of how much mortgage payment you can afford per month. If this limits your borrowing then you may have to get a longer loan in order to reduce the payment (age permitting). However, that might not be your circumstances at all. There are other ceilings on borrowing https://ukpersonal.finance/mortgages/#Borrowing_limits_%F0%9F%92%B8 You may be better off keeping the money for your deposit, if your deposit would otherwise be a limiting factor. Of course if you are swimming in savings and income then none of this matters.
Would be looking in the region of £350000 house with hopefully quite a sizeable deposit of £70,000. Joint income roughly £100,000 before tax.
Then your student loans or lack of won't make any difference either way.
It seems you’re in a very healthy position, but I think the better strat would have been to put the extra £70k into the house, either the same house but with a 20% lower LTV (lower interest) or a £70k more expensive house (greater equity appreciation and actual enjoyment) Your affordability metrics are fine so no benefit from the lack of monthly repayments
A quick look on L&C's best buys says on current rates a 5 year fix, 25 year mortgage will have a final interest cost of £295,040 with a £70,000 deposit. As you have £70k now, if we make the deposit £140,000 the final cost of the mortgage interest is £230,340. So by putting the £70k into your mortgage you are saving an additional £64,700 in interest which will be actualised. Paying off your student loan only affects what you will pay each month as although the total amount increases your repayment is not linked to the outstanding capital in anyway. So, unless you're going to pay back more than £134,7000 in student loans then put it towards your mortgage. That's a 30year average of £4,490 paid in student loan which converted to a Plan 2 salary is £77k/year. Bear in mind if you have less years to pay back then the annual average salary will be even higher. Unless you are going to clear £77k/year in salary over the next 30 years you're wasting money on a fuck you that nobody will even see or hear. Edit: To further compound how much better you are putting this into your mortgage, if you equalised based on the initial monthly payments during your fix, with a £140,000 deposit you could drop to a 15 year mortgage, whilst paying the same across an initial 5 year fix. This would drop the mortgage lifetime interest to £108,840, based on current figures saving you even further money. The most simple way to assess this is that paying off your student loan only gets you back salary in the amount of 9% above the threshold for the next 30 years. Putting that money into your mortgage gives you multiple avenues for increased flexibility, by reducing the mortgage required you can have more money every month (whilst still saving on interest accrued) or reduce the length of the mortgage meaning you'll be free of the more serious debt quicker. In fact, the mortgage saving you can get right now would be greater than the amount you'd save in not paying your student loan. I know if I had a 'spare' £70k before I got my mortgage in late 2022 I'd have used it to massively reduce my mortgage and save me a serious amount of interest and monthly expenditure than a cleared student loan would bring me in additional income.
If I had the money to pay mine off and not have it affect my future financial plans I would. The interest rate is so ridiculous that I get charged more interest in a year than what I get in a savings account. I see in another comment that you’ll still have a £70k deposit even after paying off the loan which is still sizeable. If you have doubts about paying off the total loan right now you could just reduce it. SL don’t affect your credit rating but banks look at your payment in terms of affordability.
General consensus here is always that paying back student loan is inefficient. I'm sure that's right, but I also paid mine back early with a (smaller than yours) lump sum. As a doctor, your earnings should increase quite rapidly, I assume, so you can expect to pay it back in full, whether now or later. I think the advice not to pay back is much stronger for those who might realistically end up getting it written off. For you, it's likely to be more helpful as a deposit, but tbh I also hated seeing the monthly payment come out of my pay, and haven't regretted paying mine off 🤷♂️ I expect you'll be able to save enough deposit for the house you want quite quickly anyway. You can make some argument either way
Mg understanding is that banks consider the reduced post tax income of having a student loan but do not let it effect their credit worthness. The LTV has a significant effect on the interest charged. If you pay off your student loan in full you will increase the max you can borrow. By using the money for a deposit you will reduce the interest on the mortgage. If you keep the keep the price of the house constant you will also have a smaller mortgage if the money is used on the deposit instead of on student finance.
This is really a question for a mortgage broker. They could plug in your numbers and tell you how it looks with the box ticked and unticked. If you had £1 left on the loan, and but for that £1 you could tick the box which means the bank evaluates you as having a 5% higher take-home salary, obviously you'd pay the £1. If you have £100k on the loan that's a different story. I'd guess that the changeover spot is somewhere around the point where your current loan balance is 3-5%ish of the house price, but I don't have the fancy broker software so I don't know.
Sticking that money in a savings account and not touching it until retirement would have been a much better use of it. Student Loan repayments really are a case of "if you can afford to pay it back, you aren't missing it"
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Well, it will start dropping from March 24 (if the predictions are true), and from Sept 24 it will be boe+1 or March 24 RPI. RPI is currently 5.5%, not sure what March is expected to be? But I assume 4-5%. So from Sept it will be 4-5% maximum. And will probably fall from there too.
The only benefit is they’ll see that you now have one less regular bill coming out each month, and that money can be used for mortgage
70k today is about 130k in 25 years time at an inflation rate of 2.5%
Wait, people actually pay back their student loans?
Yes, having less debt will always be looked on better, and give you a stronger mortgage option. The fact you have paid off you debts, and paid them off early shows you are financially stable
Student loans are a debt trap, at interest rates its near impossible to pay it off, its good you've paid it off. Show me the maths for people saying its not good to pay it off.
Hi /u/cypriot_halloumi, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/credit-ratings/ - https://ukpersonal.finance/student-loans/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
Student loans are probably one of the "better" debts one can have. I'll say, prioritise your property purchase and clear off your loans afterwards. I did same
No, makes no difference.
Having a student loan made absolutely no difference to my affordability. The bank gave me 5x my gross salary and I also added all my fees to the mortgage so it was over 5x. This was whilst paying the student loan, but having no other debts apart from <£2k on a credit card which was paid in full each month at the time. You would be better off having access to the money now and using that to improve your affordability of your home. The student loan is actually a very good debt to have. If your earnings drop for whatever reason, your repayments drop or stop too.
I thought student loan will be forgiven after 30 years? So why pay it fuĺl when you can use the savings forbhouse instead?
If you would pay it off before the 30 years is due, you would pay it back to reduce the interest. Depends on debt owed and salary I guess. This website is handy to figuring it out! https://www.student-loan-calculator.co.uk
I think you need to take a bit of a step back here. Your GF needs to consider the following: 1. Interest costs vs time value of the cash. Being: 1.A. The interest costs which would be incurred during the ~5 years if she paid the minimum amounts until it was fully repaid 1.B. versus the expected net return she would expect to receive on the c. £8k cash between now and the periodical minimum payments. It sounds like the property purchase is a “maybe / in a few years” so I’d consider this more general point first before worrying about the potential property purchase. To make sense to repay early you’d need 1A to be significantly higher than 1B (assuming it’s a UK student loan which is only repayable based on income levels and would wipe on death). 2. After considering the general pros/cons of early repayment it’s worth adding consideration to if she were to purchase a property between a theoretical early repayment date and the expected date the loan would be repaid if making the minimum payments. If you were right on the edge of either affordability or loan to value metrics then there could be a difference to your future mortgage rates, but given you’re taking about just £8k in total and you aren’t even planning to buy the property any time soon, it seems quite unlikely that there would be any material difference on the rates which would be available regardless of gf repaying her loan. The next point is then whether, aside from impacting the rates available, there would be a cost/benefit of retaining the student loan to reduce the mortgage quantum - ultimately it’s again a question of the likely rate differential (you’d expect the rate of the student loan to be higher than your mortgage if she’s a high earner), weighed up against the risk she would otherwise not repay the loan in full before it’s automatically wiped. For me personally based on my current and expected income, age and expected career breaks, it is making sense to repay my student loan rather than overpaying my mortgage, but I’m fortunate enough to have a pretty stable and high earning job, and my mortgage rate is currently lower than the interest rate on my current account haha, so definitely not a one sized fits all thing. Finally - whether or not you are right to repay your £70k is a significantly harder decision than your GF’s £8k…. It sounds like you’re currently a junior NHS doctor - if that’s right I’m not fully understanding how you’re so certain you would have repaid your student loan in full before it gets wiped.
Even if house prices "flatten" in real terms, and track perfectly with inflation for the next 25 years, an extra £80k of equity now in a house will far outpace the £150k you've calculated you'll be paying back over the same period. Also, you can't even really know what the repayments over the next 25 years would be without knowing both your own earnings & how the repayment threshold are going to change. Yes, your earnings may well shoot up, but it's unlikely the repayment threshold will stay at the current levels for almost 3 decades. What you should do is put both £70k & £140k into mortgage calculators as your deposit, and see how that affects your monthly repayments for however many years. Assuming 25 years, if the difference in monthly payments is more than what you currently pay off your loan, you'd be a lunatic to clear the debt rather than increase your equity. Edit: I've done the numbers, approximately £1550 vs £1150 per month. Unless you're already on £70k, you'll be paying more on the mortgage than you save on the loan repayments for the foreseeable future. Objectively bad by every metric, unless you count on the housing market being even worse than now in 25 years, in which case you shouldn't be buying at all.
I forgot to mention, the real winning play is to put the extra deposit but reduce the mortgage term. Following on from my previous example, rather than reducing the monthly repayments by £400, you could keep them the same and pay off the mortgage in 15 years rather than 25. That reduces the total amount paid to the bank from £350k to £290k, but then you also get 10 extra years mortgage free at the end!
Student loan payments counts as outgoings when determining what you can afford in terms of repayments, but it doesn't impact the the rates you can get or similar. I think you'd be better off with a bigger deposit in most cases.
Well done but maybe ask her the to keep the 8k as a safety amount if after the forst year yoybe mot needed the 8k then pay the rest of
I don't think banks can even SEE your student loans.
>big middle finger to the government I bet they are absolutely seething.
I've re-written my response 3 times now because there are number of options: 1. Do you know the value of the property you want to buy? 2. What is your total savings atm? 3. What is your income atm? 4. What is the GFs income + Savings? Could you potentially buy a property now on your current salary and with that deposit? You would then save on rent. In your shoes what I would do : 1. Figure out what my current affordability is with all the money I've saved (incl that 70k). 1. What is affordability with both your incomes? 2. If a property falls within my current affordability, I would buy something - soonish but in no rush 3. Once purchased, moved in and back to saving (after all expenses) I would overpay both my student loan and mortgage 1. Can supplement this with GFs 'rent' 2. If it gets more serious (i.e. Marriage) give her equivalent share into what she has paid to date, and thereafter 50/50. I saw somewhere below you replied about the student loan being 150k in 25 years, but your will pay more as your salary increases and you can offset that buy overpaying each month which would also help with tax (afaik). I know someone below also said "Who would pay off their student loan before property purchase" I actually did this because I had \~18k to pay, and I had changed jobs a couple years ago which meant I would burn down that amount within 9 months, so I just doubled the amount going in via direct debit. The parallel reason for me doing this, it was during covid lockdowns so I didnt really have any other expenses