University Costs (3): Raising Money with a Mortgage to Pay University Costs Now
Research shows that the cost of a three year degree, including tuition fees and living costs, could be in the region of £60,000 to £90,000. If you won’t be paying for this in cash up front, the conventional route would be for your child to take out a student loan. However, unlike student loans of the past, today’s student loans accrue interest from the moment they are taken out. And the interest rate is 4.6% (RPI –a measure of inflation, currently 1.6% - plus 3%).
Compared with interest rates for other forms of borrowing, this looks expensive. A seven year fixed rate mortgage is available from the Coventry Building Society for 1.89% for instance. As a parent, it might be possible to raise the money through a mortgage and give this to the student rather than the student taking out their own loan. If the mortgage interest rate is less than the student loan interest rate, this could be a cheaper way to borrow.
If you are considering this route, some important points to note are:
Please note this article is not personalised advice. If you would like to discuss this idea with reference to your own circumstances please contact Richard Higgs, Chartered Financial Planner, on 0117 966 5699 or firstname.lastname@example.org.