How student loan repayments affect Help to Buy affordability, Lifetime ISA strategies, equity loan implications, and maximizing government schemes while managing student debt
Help to Buy schemes and student loans interact in mortgage affordability calculations, with lenders treating student loan repayments as monthly debt obligations that reduce borrowing capacity. A graduate earning £35,000 with £75 monthly student loan payments sees their maximum mortgage reduced by approximately £20,000 compared to someone without student debt. However, Help to Buy equity loans and Lifetime ISAs provide government support that partially offsets this disadvantage, helping graduates access homeownership despite student debt.
The key strategic question for graduates is whether to save in a Lifetime ISA for the 25% government bonus or overpay student loans to reduce monthly commitments and improve mortgage affordability. For most heading toward 40-year write-off, maximizing the LISA bonus (free £1,000 annually on £4,000 saved) beats overpaying loans that will be cancelled. Understanding how lenders assess student debt, which Help to Buy schemes remain available, and optimal saving strategies helps graduates navigate homeownership while carrying student loans effectively.
Several government schemes support first-time buyers, each with different structures and interactions with student loan debt.
Lifetime ISA (LISA):
Help to Buy Equity Loan (England - closed to new applications):
First Homes Scheme:
| Scheme | Student Loan Impact | Suitability |
|---|---|---|
| Lifetime ISA | No impact on affordability | Excellent - free £1k annually |
| First Homes | Reduces borrowing capacity | Good - discount offsets loan impact |
| Shared Ownership | Reduces borrowing + rent to pay | Moderate - complex affordability |
Mortgage lenders assess affordability by calculating disposable income after all monthly commitments, including student loan repayments. This reduces maximum borrowing capacity for graduates.
Example: £35,000 salary, 10% deposit saved via LISA
| Scenario | Monthly Loan Payment | Max Mortgage | Max Property |
|---|---|---|---|
| No student loan | £0 | £157,500 | £175,000 |
| £75/mo loan payment | £75 | £137,500 | £152,778 |
| £150/mo loan payment | £150 | £122,500 | £136,111 |
Calculation: 4.5x salary minus (loan payment × 12 × 20) for mortgage capacity reduction. £75 monthly = ~£18,000 less borrowing capacity.
Strategies to offset student loan impact:
For those who obtained Help to Buy equity loans before the scheme closed, managing both student debt and equity loan repayment requires strategic planning.
Graduate with both student loan and equity loan:
Property purchase (2020):
Current position (2025 - year 6):
Repayment priority decision:
| Feature | Equity Loan | Student Loan |
|---|---|---|
| Must repay | Yes, eventually | Only if earning, writes off |
| Interest rate | 1.75% rising yearly | RPI + 0-3% |
| Secured on | Your property | Nothing |
| Priority | Higher - real debt | Lower - contingent |
The critical strategic question for graduate savers: maximize Lifetime ISA for free government bonus or overpay student loans to improve mortgage affordability?
Graduate with £4,000 to allocate annually for 5 years:
| Strategy | Year 5 Position | Benefit |
|---|---|---|
| Max LISA (£4k/year) | £25,000 deposit saved | £5,000 free government bonus |
| Overpay student loan | £20,000 loan reduction | £1,200 interest saved |
| LISA advantage | £3,800 better position + larger deposit for mortgage | |
Exception: High earners (£60k+) on track to fully repay may consider loan overpayments after maxing LISA, but LISA still comes first.
Different UK nations and regions offer varying support schemes, each interacting differently with student loan debt.
England:
Scotland:
Wales:
Northern Ireland:
Average first-time buyer prices and student loan impact (£35k salary, £75/mo payment):
| Region | Avg FTB Price | Affordable? |
|---|---|---|
| London | £450,000+ | Very difficult solo |
| South East | £320,000 | Difficult solo |
| South West | £250,000 | Challenging solo |
| North West | £190,000 | Feasible with LISA |
| Scotland | £175,000 | Good prospects |
| Wales | £180,000 | Good prospects |
| N. Ireland | £160,000 | Best affordability |
Optimal approach for graduates combines government schemes with realistic acceptance of student loan impact on affordability.
Year 1-2 (Building foundation):
Year 3-4 (Accelerating savings):
Year 5 (Purchase year):
Student loans reduce mortgage borrowing capacity by approximately £20,000 per £100 monthly payment, but Lifetime ISA provides free £1,000 annually to offset this. Maximize LISA bonus, save realistic deposit, and target affordable regional property rather than overpaying loans heading for write-off.
Calculate your property affordability with our First-Time Buyer Affordability Calculator.
Student loan repayments reduce your mortgage borrowing capacity by approximately £18,000-£22,000 per £100 monthly payment. Lenders treat student loan deductions as debt commitments, reducing the income multiple they'll offer. A £75 monthly student loan payment typically reduces maximum mortgage by around £20,000 compared to someone without student debt.
No, overpaying student loans is almost never worthwhile for mortgage affordability. A £10,000 overpayment saves only ~£60/month in payments, increasing borrowing by just £10,000-£12,000. The same £10,000 used as deposit increases property budget by £10,000 AND secures better mortgage rates. Most student loans write off after 40 years anyway, making overpayments wasteful for most graduates.
Yes, absolutely. Lifetime ISA provides a 25% government bonus (£1,000 free annually on £4,000 saved), which is a guaranteed 25% return. This beats any student loan interest rate. Over 5 years, maxing LISA contributions gives you £25,000 deposit (£20,000 saved + £5,000 bonus) versus £20,000 loan reduction with only £1,200 interest saved. Always prioritize LISA over loan overpayments.
The Help to Buy equity loan scheme closed to new applications in March 2023. However, if you already have an equity loan, student loans don't prevent you from keeping it. The equity loan is interest-free for the first 5 years, then charges apply. You'll need to manage both student loan repayments and equity loan interest after year 5, prioritizing equity loan repayment as it's real secured debt.
Maximize Lifetime ISA contributions (£4,000 annually for free £1,000 bonus), save additional funds toward a 15-20% deposit for better rates, target affordable regional properties within your reduced borrowing capacity, consider joint applications with a partner to improve affordability, and never overpay student loans heading for write-off. Focus on building deposit rather than reducing loan balance.
Yes, regional schemes vary. Scotland's First Home Fund offers shared equity up to 40% of purchase price. Wales still has an active Help to Buy equity loan scheme. Northern Ireland's Co-Ownership scheme provides shared equity. All schemes still require mortgage affordability checks that include student loan deductions, but lower regional property prices often make homeownership more achievable despite reduced borrowing capacity.
Discover additional tools and guides to help you navigate property ownership with student loans
UK Education Policy Specialist
With over 15 years of experience in UK education policy and student finance, Dr. Sharma founded Student Loan Calculator UK to help students navigate the complex world of student loans.