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Home in on a student revolution by buying instead of renting

A new scheme has been launched encouraging students to consider buying a house instead of renting accommodation while they study.

Home in on a student revolution by buying instead of renting Share and share alike: Students who buy a house and rent rooms to housemates could save in the long term Students who leave home can expect to pay around £12,000 in rent during a three-year degree.

With the cost of course fees an added expense, many could save money by buying instead of renting, then letting out rooms. Though an 18-year-old without a credit rating would be unlikely to secure a mortgage, a little-known scheme from Bath Building Society called Buy For Uni allows students to borrow up to 100 per cent of a property's value, with their parents acting as guarantors.

It is the only FSA-authorised mortgage that allows a student to buy 100 per cent of a property in their own name while at college. However, it is subject to conditions – including a maximum loan of £250,000.Where the loan to value is greater than 80 per cent, additional security in the form of a collateral charge over the parents' property is required and the amount borrowed depends on the income from letting rooms.

It can be used as an investment, with any capital gains on the property exempt because it's the student's sole residence, and, as the property is in the student's name, they can acquire a credit rating for later on. Mortgage support manager Gill Orchard launched the product in 2006.

She says: 'The prospect of paying rent for my own child at university over a period of several years made me keen to find a way to use that money as a deposit on a property of her own and the Buy For Uni mortgage was the result. Allowing rooms to be let out supports the mortgage and can mean a smaller drain on parents' finances while their children study. 'It's quite exciting to see the changes we can make in people's lives with a bit of thought and ingenuity.'

Bath Building Society is the sole lender offering such deals, which means only a limited number of the loans are available each year.

Agi Euginio founder of buy-to-let business Northstar-homes founded UniCommodation to cater to busy parents who liked the idea of buying a property for their son or daughter but didn't have the time to find and refurbish it.

'A friend had two daughters studying a four-year course in interior design and expected to pay around £40,000 in rent,' he says. 'I said that I could find him a property using my negotiating skills and experience in the buy-to-let market and in the long run save him money.' He now finds properties for students whose parents want them to live in their own place, for a fee of £4,950.

The UniCommodation service has found places for children whose parents live abroad as well as for busy families who don't have the time to spend trawling property websites.

'We find the property, negotiate the deal, organise the refurbishment, we make sure we deliver a property that's compliant with all the safety certificates,' he says.'We also make sure the student will have enough rental income to cover the mortgage because you wouldn't want them to be stuck with something they couldn't afford.'