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How Could School Fees Affect Your Mortgage Situation?

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When it comes to getting a mortgage, there are many different factors that can have a bearing on your application. Of course, your income will be critical but so will your monthly expenditure.

Mortgage lenders will look carefully at all your financial commitments – council tax, utilities, groceries, car finance and, if it applies to you, school fees.

Of course school fees represent a significant commitment. Not only are they expensive, but you are also likely to be tied in for several years so it’s no wonder that lenders will want to factor them in when calculating how much they can lend.

Start with a monthly affordability calculation

It’s important to begin by calculating what you owe in school fees as a monthly average. Often fees are paid termly or even annually but for mortgage purposes, we need a monthly figure. So add up a year’s worth of term fees and divide by 12 to give you the monthly total.

This monthly figure should now be combined with all your other monthly outgoings and then deducted from your monthly income. This will give you a good idea of your monthly affordability (i.e. how much you have available each month to put towards your mortgage payment).

What if you have already set aside the money to cover the fees?

Occasionally we come across clients who have set aside a lump sum or an investment pot that already has enough funds to cover several years worth of school fees. It would be understandable to assume that you therefore do not need to determine a monthly cost for school fees. However, most lenders will still want to see that broken down into a monthly financial commitment. This is because they have no guarantee that you won’t decide to spend your school fees ‘pot’ on something completely different and then still have the responsibility to pay the fees each term.

Having said that, there are a couple of lenders who, in some circumstances, will accept evidence of a separate sum to cover school fees and then remove the fees from their monthly affordability calculation. These lenders are rare and we would highly recommend that you use a reputable mortgage advisor who can help you find the right lender for your individual circumstances.

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What if the fees are being paid by a family member or other extremely generous person?

We often hear from clients who are lucky enough to have a friend or family member who has agreed to cover the cost of their children’s school fees. Of course this can be hugely beneficial to these families.

When it comes to a mortgage or remortgage application, the critical factor is whether or not the fees are paid to the school directly by the benefactor or if you are paying them and they are then reimbursing you.

A mortgage lender will prefer the first of these payment methods as they will assume that the financial commitment is that of the benefactor rather than the applicant. However, if you are paying the fees from your own account and then being reimbursed, the lender will most likely consider this to be your monthly commitment and therefore include it in their affordability calculation. Their reasoning is that they have no guarantee that your benefactor will continue to pay the fees and so, at some point, you may be liable for them yourself.

So, if at all possible, try to create a situation whereby the generous aunt/uncle/grandparent/godparent/friend pays the school fees directly to the school on your behalf as this will certainly make your mortgage application more straight forward.

As always, seek out expert advice

School fees are something that we at Hudson Rose are used to considering when it comes to finding bespoke mortgage products for our clients. We have over 17 years of combined experience and a myriad of 5 star reviews from happy clients on Google and Trustpilot. We don’t look or feel like your typical financial advisors, we tend to champion the ‘take us as you find us’ approach as we find that it puts our clients at ease and allows our expert knowledge to do the talking.

So if you’re looking for mortgage advice in Cirencester (and beyond!) don’t hesitate to give us a call today – 01285 414 034

There’s always more to learn! Check out some more blogs from the Hudson Rose team!

Tips for Getting a Mortgage if You’re Self-Employed

What is ‘Loan to Value’?

Getting a Mortgage on a Property that has an Annexe


Hudson Rose Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority.
Hudson Rose Services Ltd, trading as Hudson Rose. Registered Office: 7 Bridge Street, Nailsworth, Stroud, GL6 0AA
Registered Company Number: 11008147 Registered in England

Hudson Rose Services Cirencester Ltd, trading as Hudson Rose. Registered Office: 78 Dyer Street, Cirencester GL7 2PF Registered Company Number: 13349772 Registered in England

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