You’ll be pleased to know that obtaining a mortgage if you’re a doctor ranges from super easy to ‘not as bad as it once was’. 10 years ago obtaining any kind of mortgage regardless of your employment status was much trickier.
You can now search a whole range of mortgage products with a good selection for doctors, locums and partners/members in LLP’s or LTD companies. Mortgages have got much easier actually for LTD’s due to tax changes for BTL investors. Infact buying through a LTD could be much more tax efficient as you could ‘right down’ the mortgage interest and certain other things like upkeep on the property could also be tax deductible.
We will come to all that in detail later on but for now lets run through what’s the best mortgage for doctors but divided into 3 categories:
- NHS doctors
- Locum [training & self employed]
- LLP or LTD companies [partner/member & directors]
Mortgages for NHS Doctors
3 months wage slips or NHS P60 to prove income. If you have just specialised or just moved into a new pay band, most lenders can help you obtain a mortgage based on your ‘new’ earnings. So it’s always good to highlight this and you could be asked about future earnings and Here’s not the time to be shy, talk about the role and pay band you’re on now and talk about what future earnings you expect, whether you’re due a promotion or not. A lender will want to see that you have potential to progress, put simply they want to know you have the ability to repay the mortgage from your earnings. So ensure you can then tell them you can. One thing they obviously don’t like is a drop in earnings!
3 months bank statements – ideally you should not be going into your overdraft each month and should not show things like late payments or gambling.
Employment contract – this will show your name, employment hours and pay whether its hourly or salaried. It doesn’t really matter whether you are full time or part time but just know the more you earn the bigger the mortgage amount, 9 times out of 10, that you can apply for, as it’s based on a multiple of your earnings.
Same rules apply, if you are applying for a mortgage with someone else, they will need to supply the above details too.
Get a ‘mortgage in principle’ this is a prerequisite to a ‘full mortgage’ it’s where a lender will tell you how much money they will lend to you. This again will be dependent on your earnings, credit score and deposit amount. Larger deposits get better mortgage interest rates, but most lenders will loan up to 95% of a property value, meaning only a 5% deposit is required from you.
You don’t have to pay all mortgage brokers, Habito is free, simple and quick plus brokers do everything for you, great if you are working monster shifts or are really busy currently in your department. FYI most brokers that don’t charge a fee, instead they earn their fee directly from the lender. We’ve done a full review of Habito and its totally safe read it here.
Mortgages for Locums
It’s straightforward with most locums flying through the application process as you can simply obtain mortgages like anyone else self employed or a contractor. However a little bonus is lenders can actually look favourably on doctors. ‘Time spent’ and obviously therefore pay and employment status all make a difference however. Locum roles vary so let’s break it down below:
Locum in training
In your first year as a locum whilst still training your income will be ‘employed’. Now on the whole, it is simpler to get a mortgage whilst ‘employed’ versus ‘self employed’, however the mortgage amount you could borrow whilst still training will be less as your earnings are less.
So you can either go for it now and secure a mortgage with an employment contract whilst still training or wait till you qualify. That way your earnings will be better and therefore you are able to borrow more. The other thing to bear in mind is you could be training in a different area to where you want to buy and some lenders don’t like it when you want to buy a property away from where you work. The good news is lenders like Nationwide are normally more relaxed about this with doctors [nurses and members of the armed forces] as travel is sometimes the nature of being a locum – but it’s still something to consider.
Things have changed slightly in the last few years. Lenders will consider you for a mortgage with 2 years of ‘accounts’ and it’s also possible to do it with your last 12 months self employed accounts.
Probably best if you get an accountant, there are a ton of specialists for medical professionals too, and preparing and filing a set of your accounts will only cost you a few hundred pounds each year. But they will also be able to provide expert advice in clawing back some tax and allowing for expenditure. A good accountant should be able to save a locum more than what they charge, not forgetting the time saved in outsourcing all this work to an accountant because – you’re busy!
- 1-3 years accounts. Proof can be provided through your tax receipts. This is called your SA302’s, don’t worry if that doesn’t ring a bell, it’s simple to obtain yourself and if you have an accountant this is their bread and butter they’ll know exactly what to do.
- 3 months bank statement – as mentioned above these should show you can ‘manage your money’ ideally you want to stay out of any unauthorized overdrafts, not miss any payments and have no gambling whatsoever in there.
- Contracts – if you have one make sure you provide it to the lender
Best Mortgage Lender for Locums:
Nationwide Building Society have great mortgage rates and are particularly amenable to doctors, nurses and members of the armed forces.
Mortgages for Doctors in LLP’s & LTD’s
How are you drawing your income? You could be drawing a salary from your partnership account. Or are you paying yourself only a dividend from a LTD company or taking a smaller salary to stay under a certain tax bracket and then receiving the rest via a dividend?
However you are doing it, remember one thing; you are going to need to show, within the accounts requested by the lender, ‘enough’ of an income to qualify for a mortgage. The more you ‘show’ the more you can borrow. This could mean your accountant has to prepare accounts knowing you want to apply for a mortgage. So ensure that they are aware of this so they can make necessary arrangements.
Mortgage for Doctors through a Limited Company [LTD]
Getting a mortgage through a limited company is now much easier, most lenders have several options either repayment or interest only.
Note Nationwide Building Society don’t offer Buy-to-Let [BTL] mortgages directly but instead offer them through their sister company Mortgage Works.
Rates are slightly higher for BTL mortgages than residential mortgages but the benefit is the property can remain in the name of the company. So perfect if you have other properties or investments you want to remain separate or you may want to use the property to work from as a practice.
Remember: BTL mortgage providers won’t let you live in the property, the rules are slightly easier if you want to work from a practice or surgery within one however.
If you want to buy an existing practise you could require a commercial mortgage as the premises could be considered commercial. Lenders will have their own criteria here dependent usually on how much of the property is used for commercial activities.
On the contrary; if you don’t want to buy the property through the company and want to purchase it in your own name [or joint names] provided you have the relevant income history this shouldn’t be a problem. The lender could ask to see company accounts aswell as your own personal ones. This is because if you are the director of the company you are in effect ‘paying yourself’ from the business.
Mortgages for Doctors in LLP’s
If you’re in a new partnership it’s more difficult to obtain a mortgage than say if you have been set up for 2-3 years.
So what lenders will be looking for is your income prior to starting as a partnership then using a good accountant they can project your earnings forward for a year or even two years to satisfy the lender.
If you’re in a partnership that’s been up and running for 2-3 years you should sail through the application and partnerships with a good track record are easier for lenders to judge income flow and therefore risk on their behalf. Luckily most lenders are happy with doctors within the medical profession as their profession is ‘stable’ and recession free unlike other professions.
As being in a LLP is slightly more complex than when you were in hospital service, I’d consider using a mortgage broker. Using a free but independent mortgage broker like John Charcol should greatly improve your chances. The good news is the broker will do everything for you from finding you the best deal but also all the paperwork, which there can be a fair amount of.
Usually what happens is you place the broker in touch with your accountants and they grab all the required documents and paperwork leaving you cc’d in, saving so much of your time.
Summary: Key Takeaways
Credit history – this has to be good but not ‘impeccable’ as most people think. The better your credit score the less of a risk you are seen as by the lender and you will get a better mortgage interest rate. Even a move of just 0.2%, over the lifetime of say a 20 or 30 year mortgage this will make a huge difference to the amount you are repaying.
Credit ratings are important and shouldn’t be underestimated, below are some hassle free top tips for quickly improving your score prior to a mortgage app.
- Make sure you are registered on the electoral roll
- Reduce any debts you have by as much as you can BUT ensure payments are made on time.
- Check there aren’t mistakes on your credit file. Sounds impossible or silly but it happens. Also things could have been bought or borrowed against using a joint name. Check for relevancy and amend where necessary.
- Stress test yourself – lenders will do this to you anyway so you may aswell beat them to it! Mortgage lenders will want to see, especially for locums and LLP’s that if there were say a drop in your income of 20% you could still afford the mortgage repayments. So ensure your disposable income is as high as it possibly can be. Go through your outgoings and ruthless cull things you don’t want or need anymore.