Does Your Student Loan Affect Your Mortgage?
Your student loan won’t stop you getting a mortgage, but the monthly repayments reduce how much lenders think you can afford. Here’s how it works.
How Lenders See Your Student Loan
Unlike credit cards or car finance, a UK student loan is not treated as conventional debt. It doesn’t appear on your credit report and won’t lower your credit score.
However, mortgage lenders do factor in the monthly repayment. When they assess your affordability, they look at your net disposable income after tax, National Insurance, pension contributions, and student loan repayments. A higher repayment means less income available for mortgage payments.
The Repayment “Tax”
Student loan repayments work like an extra income tax. You pay 9% of everything you earn above your plan’s repayment threshold. The higher your salary, the more you repay each month, and the bigger the impact on your mortgage affordability.
Plan 5 has a lower threshold than Plan 2, so repayments start sooner and are slightly higher at every salary level. The chart below shows exactly how much you’d repay each month.
Monthly Repayment by Salary
Based on current thresholds: Plan 2 at £28,464 and Plan 5 at £24,996 per year. Both charge 9% on income above the threshold.
What This Means for Your Borrowing Capacity
Most lenders offer roughly 4 to 4.5 times your annual income as a mortgage. But they calculate that multiple based on your income after committed expenditure, including student loan repayments.
For example, someone earning £40,000 on Plan 2 repays about £87 per month. Annualised, that’s around £1,044 which a lender might effectively subtract from income before applying their multiplier. On a 4.5x basis, that reduces the maximum mortgage by roughly £4,698.
At higher salaries the gap grows. At £60,000 the monthly repayment is roughly £237, trimming potential borrowing by about £12,798 on the same multiplier.
Key Takeaways
- A student loan is not conventional debt — it won’t appear on your credit report.
- Lenders deduct your monthly repayment when calculating how much you can borrow, reducing your affordability.
- Your credit score is not affected by having a student loan.
- Any remaining balance is written off after 30 years (Plan 2) or 40 years (Plan 5) — you are never chased for unpaid amounts.
- Overpaying your student loan to boost mortgage affordability rarely makes sense — the reduction in borrowing power is modest compared to deposit savings.