As a parent, it’s in your nature to want to support your children through their education. Not just with emotional support, but financially too.
Housing is one of the most substantial costs your children will face when heading to university. Next to the actual education costs themselves, being able to rest their heads somewhere safe and secure is worth every penny. So, you’re probably anxious to save and help them get started.
Here, we’ll look at the two main approaches to student housing: buying a property and renting accommodation.
Renting student accommodation is just like any other short-term tenancy agreement – students are permitted to stay at their residence during term times, with extensions sometimes granted to those that wish to remain in their rental accommodation throughout the rest of the year.
One of the main issues with renting student accommodation is when the rental agreement expires, students are required to vacate the property and find another place to stay. With thousands of students all hunting for the same thing, securing adequate housing can be a bit of a challenge.
According to the Complete University Guide, purpose-built university accommodation costs on average £166 per week. Over the course of 40 weeks, £6,640 per academic year. For a three-year degree, this amounts to £19,920.
As an alternative to the traditional renting method, some parents may wish to explore the possibility of buying a house for their child to stay in for the duration of their university degrees. There can be some compelling reasons to do so:
Out of most financial investments, property has long been regarded as one of the most reliable ways to make a return on your investment. The long and short of it is that everyone needs somewhere to live, especially students.
After you’ve bought your student rental property, there’s nothing preventing you from keeping it in place for the next set of students that wish to move in. After your child moves out, you can either reach out to a letting agency to handle all the hard work for you, or you can let it out yourself via a platform like OpenRent.
Depending on the size of the property, it could be beneficial to rent out any spare rooms to other students to bring in extra money.
When your child leaves university, you could consider continuing to rent out the property, however there is also the possibility of selling the property for a profit if house prices have increased over time. This depends on what the market is doing at the time, but to boost your chances of making money, you could make sure you stay on top of any renovations and upkeep.
While the cost of renting a room in student accommodation is comparable to the average deposit on a UK home, those kinds of funds take time to build up – especially factoring in your other monthly expenses. It’s therefore crucial to consider just how much of an impact that this financial endeavour will have on your savings.
The best way to counteract this is to start saving as soon as you can.
In the UK, university can be funded either partially or in full by students or their parents. When partially funded, students apply for a student loan under the student finance system.
This loan is means tested and the income of the household is accounted for when determining how much loan is given to each applicant.
Homes with lower incomes will be able to borrow more compared to higher income households. In our blog about saving for childcare costs, we estimated that parents should have anywhere from £6,463 and £11,923 saved to support their child through university.
Sometimes, a parent may wish to enter a joint mortgage agreement with their child to assist with a house purchase. This agreement involves both parties being liable for the monthly mortgage costs – a major financial burden that will impact your child’s credit profile. However, if repayments are maintained on time, the impact it will have will be positive.
Alternatively, a parent may wish to buy the property solely in their name and instil a rental agreement, allowing them to absorb most of the financial impact.
No matter who legally owns the property, you can expect all the usual legal expenses to apply. This includes researching the property, dealing with legal issues, and conveyancing charges, you may also have to consider stamp duty costs. Be sure to account for these in your savings goals rather than just thinking of the home itself.
After you’ve bought the property and your child has started paying you rent, you’ll need to decipher how much income you’re likely to receive above your tax-free limit. This will indicate how much tax you will pay on your child’s rent.
Helping your kids through university requires careful financial planning, and of course, diligent saving. Browse our savings accounts to find a plan that suits your needs, today.
As a specialist mortgage lender, Aldermore offers a variety of packages to suit any number of use cases. From buy to let mortgages to commercial mortgages, we can help you overcome financial obstacles to find a mortgage that works for you.
Subject to status. Your mortgage will be secured on your property. Your property may be repossessed if you do not keep up repayments.