A Guide to Rent Affordability for Students
When you apply to rent a property, landlord and letting agents will want to be sure you can afford the rent, and will therefore carry out checks. Guest contributor Donnell, explains what rent affordability means in practical terms, and steps you can take to ensure you meet the criteria to secure the property you want.
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Why do landlords carry out rent affordability checks?
There are a number of reasons why landlords carry out rent affordability checks. First of all, they need to manage the risk associated with a property. If a landlord has to pay a mortgage, they will want to avoid rent arrears, or void periods where they are transitioning between tenants; so they will look for tenants who are likely to pay the rent on time and in full. A tenant’s personal financial details are the best way to assess this risk and predict what type of tenant they will be.
In other cases, a landlord’s choice may be restricted by their loan agreement. Some mortgages only allow tenants that make a certain income, and therefore may exclude students for example.
Where does a rent affordability check come within the rental process?
Most of the time, rent affordability checks are done during the initial application process, when a prospective tenant is asked to provide information about their income and employment status, as well as any other financial obligations they may have. This information is then used to determine whether the applicant can afford the rent and associated costs of the tenancy, or whether they may need a rent guarantor to make them less risky to take on as a tenant.
In other cases, rent affordability checks may be carried out at regular intervals e.g. annually, to ensure that tenants are still able to afford the rent. Ultimately, the timing and frequency of rent affordability checks will depend on a landlord’s policy.
As a student, how can you make sure you pass rent affordability checks?
For student rentals, the application process may involve additional rent affordability checks, in view of the fact that, unlike other tenants, students will not generally earn enough to cover rental payments. There are certain steps you can take to prepare and be more likely to pass the check, so the letting agent or landlord will allow you to rent their property:
Have a rent guarantor
A guarantor is someone who will be added to the agreement between a tenant and a landlord, who would be liable to pay the rent if the tenant is unable to pay.
Many students are unable to commit to regular employment because their time is spent studying, taking exams and getting on with the many tasks that full time education involves. In order to guarantee the rent payments, the landlord is likely to request a guarantor, and students typically ask family or close friends to act as guarantors. However, it is crucial to understand that the guarantor will also be subjected to affordability checks, to ensure they can pay for rent, utilities, and any damages caused by the renter, so make sure your guarantor is aware of this.
Get a part time job
If you are able to increase your income in any way, this will improve your chances of being approved for the house you’re applying for. As well as this, it’s important to declare any amount you receive as a student loan, in order to build trust in the eyes of a landlord or a letting agent doing affordability checks.
Only consider properties you can afford
For instance, if you know that with a guarantor in place, you are able to qualify for a property charging £2,000 rent, then looking at properties in the range of £1,500 – £2,000 will increase the amount of homes you are able to afford.
Offer to pay more rent upfront
Students are often required to pay a certain amount of rent upfront anyway, as this reduces the risk for letting agents. A typical figure would be six months’ rent paid up front, but you could offer to pay more if you want to increase your chances of approval.
The first thing you should do when renting as a student, is to make sure that you have to hand all the correct information and funds required for becoming a tenant. Funds required upfront include a security deposit (which will be up to five weeks’ rent) plus the first month’s rental instalment.
Secondly, a prospective tenant will usually have to provide a minimum period of three months’ bank statements. They will also have to provide some form of proof that they are a student, and that they are enrolled in the course they say they are studying.
How can you decide who to live with?
If you rent from a private landlord or letting agent, the most common tenancy in the UK is an Assured Shorthold Tenancy (AST). if you have flatmates, it means you’ll likely be taking on a shared tenancy agreement or a joint tenancy agreement which brings a certain amount of risk. You and your housemates will all sign a single tenancy agreement with the landlord, so it’s essential you are careful when choosing the people you want to live with.
You should definitely consider if the person you’re planning to live with has an appropriate sleep schedule that suits you, and that you get along with a partner who is likely to visit them.
Most importantly, what sort of reputation do they have in terms of prompt payment for rent or their share of bills? If they don’t pay up on time, would you be prepared, or able, to step in and pay their share? A joint tenancy is a legal agreement where you all share equal responsibility for the full payment of the rent, bills, or for any damage. So if anyone fails to pay, the landlord could pursue any tenant, or the whole group, or any guarantor, for the total amount owed. There are of course ways around this like signing a separate tenancy agreement, but in general, financial problems are a huge deal, and something you should definitely consider when weighing up who to live with.
How much can you afford?
When working out rent affordability, it is important to take into account your other outgoings besides rental payments; this includes ongoing costs such as council tax, utilities bills, contents insurance and other regular commitments like debt repayments, as well as general living expenses. You will also need to budget for the upfront costs of taking on a tenancy, such as the security deposit (which can be up to five weeks’ rent in advance).
About the Author, Donnell Bailey
‘I started my career producing content based on the property market. Day to day, through careful research, I help produce the right material online and offline, to make sure landlords have a smooth experience using the Lofti app, and tenants can check their affordability using our rent affordability calculator.’
Find out more about the costs of renting
When working out your rental budget, it’s important to factor in all your outgoings so you know exactly what you can afford. That includes the upfront costs of taking on a tenancy, as well as ongoing rental costs and your usual living expenses (groceries, transport, leisure etc.)
Costs of Taking on a Tenancy
Upfront costs of taking on a tenancy, plus safer payment methods
Ongoing rental costs – find out who pays for what, so you can assess the affordability of a property, & budget effectively
Living in shared accommodation
If you are moving in with other people, understand the various types of tenancy agreements, which all have different implications for your rights & responsibilities