Buy-for-uni Offering Many Options

Of all the variations on the traditional act of people
buying a mortgagesimply as a home to live in themselves,
buy-for-uni is a somewhat unusual one.

Such a mortgage, which is presently only offered by one building society, works by securing the property bought for the student to live in while at university on their parent's home, which then make the student liable for ensuring the payments through their responsibility to their parents.

In practice, of course, this is an investment undertaken by parents with a large amount of equity already, perhaps including their own pre-existing property portfolio.

Pointing this out, Darren Cook, head of mortgages at personal finance website moneyfacts, said this kind of transaction would only be undertaken by "higher net worth customers".

Yet, he stated, the move could pay off well by getting the student on the housing ladder. "Obviously it's going to be seen as a good investment from the parents' side of things. If you've taken a student's property [for] three or four years or whatever, they can convert it to a student buy to let scenario and rent out rooms."

Nor were these, he added, the only possible investment option - there was also the sale of the property at a higher price, making it a "short-to-medium term option".

Mr Cook said there were other reasons as well, notably "security" as the students didn't have to share accommodation with strangers, as well as the taste of independence that the move would bring.

Those looking at such a possibility may want to consider the student buy-to-let option among their possible ways of making such an investment pay off.

Already it is known from research carried out this year by Landlord Mortgages and buy-to-let firm Paragon that student buy-to-let produces better yields than non-student lets. The former found that the average yield differed by 6.59 per cent to 5.42 per cent, while the latter found that those landlords with student properties in their portfolios had average yields of seven per cent, compared with 5.6 per cent for those who did not.

In addition to this, there is good evidence, both from research and anecdotally, that homes in university towns attract a premium, with the average price higher in such locations than in their counties. This was the finding of research by Halifax earlier this year and is backed up by the local knowledge of estate agents.

Oxford, for example, which as well as its famous colleges also hosts Oxford Brookes University, has just been placed joint first with Kingston-upon-Thames (which also hosts a university) in the UK annual growth index for property website Rightmove, the Guardian reports. Wayne Keenan, Oxfordshire area manager for Andrews Estate Agents told the paper: "The large student and professional population in Oxford means there are always more buyers than houses."

Such as is true of Oxford may be true of many places, with the professional population element of a town or city often being linked with the expertise, technology or enterprise stimulated by the influence of the local university. In short, those who buy-for-uni may well find themselves with two very viable choices of selling at a profit or enjoying the high returns of student buy-to-let once their child has graduated.