Investing in your own student room sounds like an unattainable goal to many, especially if you are a student with no fixed income. However, it can be done in other ways.
Why buy a student room?
Buying a student room has several advantages. Not only does it provide a stable living environment during your studies, but it is even cheaper than renting a studio or flat. Moreover, if properly chosen and managed, the room can increase in value, which can provide a nice financial benefit after your studies.
An added advantage is that rents for student houses and studios are often higher and the quality sometimes leaves much to be desired, especially in terms of energy efficiency. Many rented student houses have poor energy labels, which can lead to higher energy costs.
Financing options without income
The biggest obstacle to buying a student room without a fixed income is financing. Banks are usually reluctant to give loans to students with no income. However, there are alternative ways to get financing:
- Family and network: Many students choose to borrow money from relatives or acquaintances. This can be an effective way, especially if the loan has more favourable terms than a regular bank loan.
- Using surplus value: If your parents or other loved ones own a home, they may be able to use the excess value of their home to take out a mortgage. This money can then be used to finance the student room.
- Repayment-free mortgage: An interest-only mortgage can also be an option. Here, you only pay the interest during the study period, which significantly reduces the monthly costs. For a €150,000 room, for example, the cost will then be €437.50 a month, which is often lower than the average rent.
A secure loan
Because a mortgage is established on the student room, it is a loan without too much risk for the mortgage lender. In addition, students can in principle borrow money from the government to meet expenses. However, it should be borne in mind that legal interest rates are charged. These can be negotiated by borrower and lender. Of course, part of the interest can always be donated back.
What does it cost?
For a purchase price of, say, €150,000 with a standard annuity mortgage, you would pay around €673.57 a month in interest and repayments. With an installment-free option, you reduce this to €437.50 a month, which can be more financially attractive during your studies.
Potential increase in value
Another important aspect to consider is the potential increase in property value. With an annual increase of about 4%, the value of the student room can increase by about €25,000 after four years, which is a nice addition to your wealth after college.
Conclusion
While buying a student room with no income can be challenging, it is certainly not impossible. With the right planning, support from your network, and smart financing options, such as a repayment-free mortgage, it can be a smart investment that costs less than renting and potentially increases in value. Of course, this requires good preparation and sometimes a willingness to think outside the traditional box.
