Doctor Mortgages
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Doctor Mortgages (Part 1)
Miles Robinson explains how the mortgage process works if you are a doctor.
Podcast approved by The Openwork Partnership on [xx/xx/xxxx].
Why can it be difficult for doctors to get a mortgage? How do mortgages work for doctors?
It’s probably quite surprising to some people – why would it be difficult for a doctor to get a mortgage? It should be easier, right?
But the reality is that doctors often have irregular or complex income streams. They might have an NHS salary, with some private work – perhaps in a GP practice that they get a self-employed income from. They may be doing locum shifts or consulting.
We often need to bring a variety of different income streams together and educate the lender about them. Consulting or locum work can also be volatile, and some lenders can view that as unstable.
Doctors may also be moving between different jobs, hospitals and regions, which will impact their address history. That’s common in the earlier years as a junior doctor. Lenders may feel uncertain about this and where the income is coming from.
As an advisor specialising with doctors, it’s our job to ensure that the lender fully understands the income and the history around it.
How do high levels of student debt affect a doctor’s ability to get a mortgage?
Student loans can affect the overall affordability, and doctors may have both pre- and post- graduate loans. The doctor’s earning levels influence how much they’re paying back, normally through their pay.
Lenders just treat that as a normal loan commitment. They don’t normally penalise doctors for the size of the debt, because it doesn’t appear on the credit file. It’s not seen as the same as credit card balance or car finance. Lenders just look at the regular monthly payment to make sure a mortgage is affordable.
What impact do short-term contracts have on a mortgage application for a doctor?
This could be rotational work, locum contracts, or fixed-term contracts for six or 12 months.
The key really is continuity of employment and the history of your role as a doctor.
If there are multiple contracts or you’ve been doing locum work for six months, we work with lenders that take a much broader view. There’s clearly demand for doctors, and these lenders understand NHS Trust structures and how many have moved towards fixed-term contracts.
There’s understanding from lenders, but their policy isn’t always completely reflective of that. But we know which lenders take a broader view based on your occupation as a doctor. The wider circumstances of the case are really important when we’re packaging it for a mortgage lender – it’s much more than the criteria published on their website.
How does complex income affect a doctor’s chances of securing a mortgage?
Many doctors have a salary in bandings, overtime, shift allowances, private work or self-employed income. There are many layers in how doctors are remunerated.
With standard lenders, if you just send in payslips they can really struggle to assess income accurately. An advisor needs to work harder in dealing with these cases – especially when it’s a bit tight on affordability or we’re borrowing at the higher end of what’s possible.
It’s down to us to lay that out to the lender and explain the salary, the shift allowances and the overtime. We might also add in six months’ payslips for the locum work.
By presenting the story and the circumstances to the lender they often use 100% of those income sources, certainly for a doctor. But that broker is really key because a lender won’t do all that work for you if you approach them direct. A broker maximises your chance of acceptance for what you want to borrow.
Why might a history of moving affect a doctor’s mortgage application?
In their early years doctors are often moving for different placements. As some of the busiest people on the planet, updating addresses or the electoral roll are often at the bottom of the to-do list.
Address history can be a factor in getting a mortgage. So get an experienced broker to look at the credit report and address history. We’ll recommend the best way forward, with lenders that are perhaps more forgiving on certain parts of the application, to maximise your chances of success.
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How do professional mortgages help doctors in the mortgage application process?
Professional mortgages are designed for doctors, dentists, lawyers, solicitors and other professions. In some cases, there’s more flexibility in what they offer. Some lenders offer six times salary, for example, whereas the standard is between four and five.
So if a professional has £100,000 in household income, we could get them a £600,000 mortgage. For the rest of the market on similar income, the mortgage might be £450,000 or £500,000.
The reason for that flexibility is that lenders understand that the income trajectory in the early stages of those professions rises quickly. There are structured pay rises for those roles which gives lenders more confidence to lend at higher levels.
They may also allow lower deposits, as well, based on that trajectory of earnings over the long-term.
What are the benefits of using a specialist mortgage broker for a doctor’s mortgage application?
Some brokers have exclusive rates for professionals, although not always. In some cases, we will just place it on the high street.
The key here is saving you time and reducing the risk of applications being declined. We’ll interpret payslips and employment structures in the right way, and get the documents that we know the lender’s going to need.
It’s ultimately about trust and experience, to present you in the best possible light for success.
What are the credit score considerations for a doctor applying for a mortgage?
This is pretty consistent with the rest of the market. The only variance is that address history. If you can, make sure that everything is registered to the correct address and you’re registered on the electoral roll.
Keep your credit card utilisation under 30%. If you’ve got a £1,000 limit on a card, try and keep the balance under £300. That’s a positive for your credit score, as opposed to reducing it.
Avoid hard searches. As a broker, we can tell you which lenders only do soft credit checks.
It’s the majority of them now, but a couple still run hard searches that can impact credit footprints.
There are plenty of credit monitoring services out there, which help you make sure there are no inaccuracies around addresses or an unpaid bill that you forgot to pay – little blips you might miss.
If a client gets an unsuccessful decision, it’s often down to something they didn’t know about from an old address. So, if you’re not far away from buying a property or remortgaging, just keep an eye on that credit score.
You’ve demonstrated again how a mortgage broker can help throughout the episode. Any final thoughts on this?
We’ve covered a fair bit. Ultimately, as advisors, we’re a long-term partner for doctors and professionals. As your income grows, your expectations change. Having a broker to support you early in your career will guide you through at each point – from junior doctor to registrar or consultant.
We advise you at each stage of that career and the financial impacts. You will be thinking about your home, the area where you live, where your children are going to school… and we can help shape your life and future.
We work a lot with professional clients like doctors and provide realistic, up-to-date advice on what they can and can’t do.
Key Takeaways:
- Doctors often face challenges in securing mortgages due to their complex and irregular income streams.
- While student debt can affect overall affordability, lenders typically do not penalise doctors for the size of these loans.
- Experienced brokers work with lenders who understand the continuity of employment in the medical field and the consistent demand for doctors, even if standard policies don’t always reflect this.
- A specialist advisor is crucial for accurately presenting a doctor’s complex income to lenders.
- Professional mortgages offer greater flexibility for doctors, including higher loan-to-income ratios and potentially lower deposits.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
MOST BUY TO LET MORTGAGES ARE NOT REGULATED BY THE FINANCIAL CONDUCT AUTHORITY.
Approved by The Openwork Partnership on [xx/xx/xxxx].
