Students can't afford milk, but they can now bag a house with this 100 per cent mortgage

But they'll still need a little help from their parents

When  kids head off to university, you can expect two questions to occur to regularity: 'how do I cook/wash [insert item]' and 'can you lend me some money?'. While we can't help with the first one, this new Uni Mortgage could help with the second.

Related: Martin Lewis says everyone should be looking to switch mortgages now

The new Uni Mortgage was launched by Vernon Building Society this week. It helps University students get on the property ladder with a 100 per cent mortage. However,  parents will have to put down a cash deposit or put a stake of equity in their own home on the line.

Vernon building society Uni Mortgage

The mortgage is one of the best value of its kind, offering a five-year discounted rate at 4.7 per cent over a 25-year term. After five years the rate rises to 5.2 per cent.

There is also an additional set up cost of £499, if you borrow 80 per cent of the property's value. And £899 if you borrow between 81 per cent and 100 per cent.

dark grey wall with wooden flooring and wooden dining table with flower on glass jar

(Image credit: future PLC/Fiona Walker-Arnott)

To qualify for the mortgage, students must be in higher education and 18 or over, plus have at least one year left of their course. The mortgage can't be used on a flat, but must be used on a property with a maximum of four bedrooms and three tenants.

The property also has to be priced between £125,000 and £300,000 and within roughly a 10-mile radius of the university.

Because the student's name is on the title deed, and assuming that they're a first-time buyer, stamp duty will only need to be paid if the property cost more than £300,000. Another plus side of this mortgage is that the student is effectively a buy to let landlord – and can collect rent from his flatmates to cover the mortgage repayments.

exterior with white wall and white window

(Image credit: Ti-Media)

So far, the Vernon building society sounds like a great way to help your kids get on the property ladder early. And fingers crossed your kids will find themselves slightly more financially sufficient.

However, on the other hand, if you're not sure your son or daughter can keep up with the monthly mortgage repayments and you can't help them out, this might not be the best option.

Parents have to cough up a deposit for the amount of the loan that's above 80 per cent of the loan to value. This is held by the building society in a Financial Service Compensation Scheme that pays 1 per cent interest and is returned at the end of the mortgage deal.

living room with white wall and sofa with cushions and wooden flooring

(Image credit: future PLC/Georgia Burns)

Parents can also put a stake of equity in their home on the line, equivalent to the amount of the loan that exceeds 75 per cent loan to value. However, what this means is that it's the parent's cash on the line if the home falls into negative equity or repossessed.

'Before diving in, students and parents alike will need to research the areas properly to get the right property in the right location. They will also need to consider the practicalities,' advises Paula Higgins, chief executive of the property advice website HomeOwners Alliance.

bedroom with white wall and lamp on bedside table

(Image credit: future PLC/Brett Charles)

'You are likely to have an annual turnover, meaning you could spend quite a bit of time looking for new tenants. Students will need to be prepared to balance being a landlord with their studies. And parents need to avoid eroding their finances in a way that impacts on their financial stability in later life. It's at this point in your life that we recommend getting independent financial advice,' she adds.

Related: First-time buyers using Help to Buy could be forking out more for a new home

Would you help your kid get on the property ladder while they're still at university?

Rebecca Knight
Deputy Editor, Digital

Rebecca Knight has been the Deputy Editor on the Ideal Home Website since 2022. She graduated with a Masters degree in magazine journalism from City, University of London in 2018, before starting her journalism career as a staff writer on women's weekly magazines. She fell into the world of homes and interiors after joining the Ideal Home website team in 2019 as a Digital Writer. In 2020 she moved into position of Homes News Editor working across Homes & Gardens, LivingEtc, Real Homes, Gardeningetc and Ideal Home covering everything from the latest viral cleaning hack to the next big interior trend.