Doctor Mortgage
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Doctor Mortgage
Hemat Natha explains the mortgage process for doctors.
What is a Doctor’s mortgage?
There isn’t a doctor specific mortgage, but there are mortgages designed for professionals. Certain lenders treat doctors in a more positive way because of their profession and job security. Some lenders will allow you to borrow a bit more because of that.
Why can it be difficult for doctors to get a mortgage?
It isn’t really. Obtaining a mortgage always follows the same principles. We explore your income and how it’s structured and then we go out to the market to find a suitable lender.
Doctors do have their incomes structured in many different ways. If you’re a GP for example and you’re a partner in a practice, you would use partnership income. If you were a plastic surgeon you might obtain income through private work as well as the NHS.
We’ve also done a mortgage for an Anaesthetist who had a base income from NHS plus private consultancy work. It could be structured through a limited company and the client does their normal tax declarations. The beautiful thing is we can take all forms of different incomes – we just need to understand how it’s structured and advise accordingly.
How does high levels of student debt affect a doctor’s ability to get a mortgage?
Student doctors start on a tiered income level and the lower the income, the less is deducted for student debt. The details will be on your payslip.
Most lenders don’t look at the amount of debt in the background – they look at the monthly deduction on that payslip and the proportion of their income you’re paying towards the debt.
That said, there are professional mortgages for doctors and student doctors, where lenders will allow you to borrow a bit more. They know that those student doctors are going to earn a certain amount while they get through their training.
So student debt could have an effect – but it’s not too important if the salary is lower because the student loan payment is lower as well.
What impact do short term contracts have on a mortgage application for a doctor?
It depends on how many times the contract has been renewed, the length of contract and the doctor’s experience.
When we talk about short term contracts we need to understand if we’re talking about fixed term contracts, are they with the NHS for a certain amount of time? Are they looking at private work, are they contracted to a private hospital and is that contract going to be renewed?
There are quite a lot of factors to consider. It’s best for a doctor to come and talk to us about their contracts and we will go to specialist professional mortgage lenders that can account for all of these factors.
How does complex income affect a doctor’s chances of securing a mortgage?
We work to understand your income and its structure and ask you the relevant questions to help you find a solution.
Doctors have big time pressures – we can take all those away and give you a solution. Sometimes there are complex situations, where doctors may own other properties like holiday homes, or they may require further borrowing to do some renovations. That’s what we’re here for.
Why might a history of moving affect a doctor’s mortgage application?
As long as you maintain your address history and your credit commitments and you’re on the electoral roll, that’s what’s important.
Lenders want to see that you can maintain credit – again this is a part of the getting-to-know-you process, where we’ll advise accordingly.
How do professional mortgages help doctors in the mortgage application process?
They can help quite significantly. A couple of lenders have a professional range, where if there are anomalies in the income such as a forward contract commitment, or net profits from self-employed work have reduced, they can take those things into account.
The majority of the time, we approach a professional mortgage provider because the doctor wants to stretch their income multiples and borrow a bit more. Rather than buy a starter home and then move into their home for life later, they might go for that forever home straight away, by stretching themselves a bit more. We’re seeing that a lot, especially with doctors who are just coming out of their training phase.
What are the benefits of using a specialist broker for a doctor’s mortgage application?
Brokers understand the complexity of your income. We’re well versed with multiple different contracts with partnership structures, self-employed structures and having family members within companies.
We also understand that some doctors will not want to draw all their income out of their limited companies for tax reasons. Instead, we look at using the net profits.
This knowledge is built up through years and years of experience. It’s not finding loopholes, It’s using the information to maximise what we can get for our doctors.
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What credit score considerations should a doctor keep in mind when applying for a mortgage?
Lenders will credit search you, and each one has their own scorecard that sums up the risk to them. Key things they’re looking at include whether you’re on the electoral roll and whether you are heavily indebted. If you have £50,000 worth of credit card debt and £50,000 of income, that’s a high risk.
They also want to see that you’re able to maintain the credit. If you’re taking out car finance or you’ve had a mortgage in the past, they want to see that you’ve been able to pay it back in full and on time.
We use Checkmyfile, because it has three of the four major UK credit reference agencies. They’re looking for lots of greens and zeros on that report.
Why is being on the electoral role important when applying for a doctor’s mortgage?
If a lender can see where you’ve registered, it confirms where you live. Knowing where you are means they can chase you and keep track.
How can a credit profile linked to others affect a doctor’s mortgage application?
Certain lenders will only credit search the mortgage applicant. But if you do have joint commitments like a credit card or a mortgage, and the other person fails to pay them, that will also affect you.
We did one mortgage where there was a divorce and the husband was supposed to pay the mortgage and didn’t. It was under court order that he had to pay the credit commitments, and the wife wasn’t taken off the debts. She wasn’t able to obtain a mortgage because of that.
You’ve got to be careful not to get into joint credit commitments unless there’s an arrangement between yourselves to make sure it is well maintained.
What are the visa requirements a doctor needs to consider when applying for a mortgage?
We’ve got quite a few doctors coming from overseas on highly skilled visas and in fact, we have recorded a previous podcast on visas.
Some lenders could take your income from abroad if you worked as a doctor there as well. But typically you’d need to have lived here for a certain length of time, depending on your visa.
You need to have built up a credit history in the UK and we will also look at the length of remaining on the visa and the type: tier one, tier two, highly skilled etc. Just give us a shout and we’ll be more than happy to talk you through those questions.
How can a doctor prove their financial health when applying for a mortgage?
We ask everyone the same questions. We’ll go through and understand the income and do a budget planner looking at income and expenditure. We’ll look at savings and what you have in place for your retirement if you have started to think about that.
We don’t do Wills, but we’ll refer you out to someone we trust if you need one. We’ll also make sure that if the unexpected happens – like an accident or a critical illness like a heart attack, stroke or cancer – you have insurance policies in place.
NHS sickness benefits are pretty good, but there are things to think about. Let’s say you’re a surgeon but something happens and you’re unable to use your hands. After six months of full pay, what will happen next if you can’t work?
We can set up an income protection policy and other specialist policies. It’s our job to put everyone in an informed position on why they might need these products. Everyone says it’s never going to happen to them, but speaking from personal experience, it can.
Our advisers will guide you through within your budget and take it forward from there. That whole process tells us your financial health. But it’s important to think about your financial health in the short-term, medium-term and long-term.
The short term is your monthly budget and having emergency funds if something goes wrong. Can you survive for the next three months? What have you got in place? Your long-term financial health is about having a Will in place, life insurance, critical illness insurance, planning for inheritance tax, and retirement.
We advise on mortgage and protection – including buildings insurance. We also help with business protection as well. If you’re a doctor you may need to protect your business, especially if you have shareholders. We’re at the centre of it all and we can direct you.
What mortgage options do doctors have?
There are lots of different options. We’ve just done a mortgage for a dentist who’s a doctor, and we’ve set him up with what’s called an offset mortgage.
We tend to find that doctors have quite a lot of spare income in their limited companies, and they often don’t realise that you can offset some of that, pay less interest on the mortgage and lower your monthly payments.
We’ve done that successfully for quite a few of our doctor clients. The beauty about it is if you want to buy a car or do an extension, or you’re looking to buy another GP practice or do something with your savings, you can take the money out of the offset account within 24 hours. The money’s liquid.
In London, you frequently have high property prices, low mortgage amounts and people who don’t have access to that equity to borrow. An offset mortgage isn’t right for everyone but it’s something that can be very flexible.
What advice and guidance do you have for doctors who are saving for a house?
For those saving for a house, come to us as early as possible – because obviously buying a house is a long-term goal. Get some advice now, because it could help you in the future.
It doesn’t cost anything to get advice from us, and we’ll check in quarterly, annually, half yearly – whatever you prefer. We’ll keep you updated with what’s happening in the market.
What advice do you have for doctors who are buying their first home and looking for a mortgage?
Let us know the structure of your income and let us understand your circumstances. Then we can chart the route forward. That’s probably the best advice that I can give to anyone – not just a doctor. Come to us early on in the process, let us advise you throughout – it’s the best way to do it.
Your home may be repossessed if you do not keep up with your mortgage repayments.
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