Mortgages for Doctors
Traditionally, mortgage lenders favoured applications from professionals such as lawyers and doctors – basing lending criteria not just on their current income but on what they might be expected to be earning in ten years.
So-called professional mortgages – such as mortgages for doctors – therefore, tended to offer the ability to borrow more than other applicants. Medical profession mortgage offers tended to reflect multiples of what the individual might be earning a decade or two from now. The freedom of lenders to make such offers became somewhat more limited following the financial crisis of 2008 and the formal Mortgage Market Review of lending criteria which came into effect in 2014.
Here we discuss what your mortgage options are if you are a doctor – and how we can help.
Why can it be difficult to get a doctors’ mortgage?
Mortgages for doctors have become more difficult simply because of the much more extensive range of employment styles and contracts these days. Many doctors do not enjoy the fixed salaries on which some other professionals may depend – and the easily measured fixed income projections welcomed by mortgage lenders.
Instead, you might be on a medical training contract, newly qualified, a locum, self-employed, or on a temporary contract. Even if you are on a fixed contract, which you expect to be renewed, your future – and the income on which you depend – is by no means guaranteed. That uncertainty is highlighted in a case described in a Health and Care Update.
As a doctor, there are any number of possible factors determining your income now and in the short and longer-term future. The range and complexity of those possibilities make the mortgage lender’s task of calculating risk and affordability that much more complicated – and if you are newly qualified, of course, you won’t even have the financial accounts on which to base any established pattern of earnings.
I am a newly qualified doctor. Can I get a mortgage?
Mortgage lenders typically require any applicant to have been in the same employment for at least the past three months.
For a newly qualified doctor, however, there are mortgage lenders that are prepared to consider applications if you have just started or expect to start your first job within the next six months.
Are locum mortgages available?
As we have mentioned, however, by no means do all doctors work on regular fixed-term contracts likely to continue into the indefinite future.
If you are currently working as a locum, you are likely to have had at least a few years of regular employment within the NHS – a pattern of income which any potential lender may recognise and consider.
As a locum, however, your hours are likely to vary – and, just as they vary, so too will your income. That is where mortgage lenders begin to encounter difficulties which may hamper your application for a locum mortgage. But locum mortgages are available – especially if you identify those lenders with the expertise and experience of dealing with locums such as yourself.
Can I get a self-employed doctor’s mortgage?
Applications for self-employed doctor mortgages may run into similar difficulties. Although you might once have worked as an employee of the NHS, you have now taken on a self-employed role. You might continue to work part of your time within the NHS and some of the time in self-employed private practice.
In any of these situations, it is likely to prove more than usually difficult to furnish the financial information about your income that any mortgage lender is certain to require.
Out of an abundance of caution, many lenders may insist on your submitting two – or even three – years of audited accounts or certified tax returns. These are used as evidence of what might be expected in terms of income from all sources in the coming years.
Fortunately, however, other mortgage lenders are less stringent in their demands for such evidence. They may accept just one year of accounts or tax returns, for example, or even consider your forecast of expected earnings from day one.
How much are doctors able to borrow for a mortgage?
As with other mortgage applications, mortgages for doctors – and the amounts that may be borrowed – are calculated in multiples of estimated or actual annual earnings.
The precise multiple employed is likely to vary from applicant to applicant but is typically at least 4.5 times annual income and, in the case of doctors’ mortgages around five times.
It should be stressed that there is no fixed rule, however. Senior doctors and consultants, for example, might be offered a still higher level of borrowing. The amount may also depend on the size of the deposit you are putting down. The bigger your deposit, the lower the loan to value ratio, and the more you may be able to borrow.
Once again, what all of this highlights is the importance of consulting a specialist, whole of market mortgage broker with the expertise and experience of dealing with mortgage applications from individuals with more complicated earnings and income patterns.
At Needing Advice, we recognise the wide range of possible employment patterns of medical practitioners and understand the difficulties that may be faced when searching for doctors’ mortgages. We can help in your search – to find out how, please get in touch with us. We’d love to help.