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Doctor Mortgages Frequently Asked Questions
Listen below as Michael Webb talks all about mortgages for doctors.
Are there mortgages tailored to doctors? How does it all work?
It all depends on lenders’ criteria. There’s no specific mortgage for a doctor but there are criteria that apply to doctors. I do think that this is an area where banks could do very well to put specific deals out there for individuals in the NHS, but right now there are no specific products.
You don’t come to a mortgage broker and say I’m a doctor, I want to get a doctor mortgage. But doctors will normally be very well received for a mortgage. There are very specific criteria that apply to the scenarios and situations that doctors find themselves in.
What are the challenges for doctors looking to apply for a mortgage?
Most doctors, once qualified, will be on training contracts for a period of time. These contracts can last several years depending on what they’re progressing towards. A GP, for example, will do their specialist training as a general practitioner and perhaps get a two year training contract and then move. While they still work for the NHS, the trust named on the top of the pay slip may change and there might be P45s involved.
Doctors are on a very secure career path. Their salaries escalate, and at a point will increase quite rapidly – almost doubling over a couple of years. A good mortgage broker can discuss where the client is on that journey with the lender. Understanding your next steps will help us pitch your application to a mortgage provider to get a positive outcome.
Also, just like nurses, junior doctors have shift allowances on their payslips. They’ll work nights, weekends and bank holidays. Their payslips will fluctuate and their net pay is going to change depending on their shift patterns. That’s much more specific to a hospital doctor than a family GP, for example. So understanding of all this and being able to pitch that to a lender is really important.
The other thing that lenders look at that’s very specific to doctors is the likely possibility of student debt coming off their payslips. Their salary is going to kick them immediately over the threshold to pay back loans. Doctors are also likely to have quite high pension contributions on those payslips.
When it comes to student debt for doctors, lenders won’t ask what the overall debt is. It could be quite high because you’re studying for many years and running up more debt than someone doing a three year degree. No lender will penalise you for the balance on that debt. They will just look at the deduction from your salary.
One other thing we find with junior doctors is that they take multiple contracts, perhaps across multiple NHS entities. Very typically they will have an NHS contract and do some private contract work to increase their overall income. So again, it helps to have an understanding of that and how to utilise both incomes towards a mortgage application.
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How can these things be balanced against the longer term earning potential of a doctor?
One product we’ve often talked about is Joint Borrower Sole Proprietor. Lenders can only assess a borrowers’ situation as it is now. So what a lot of the doctors that we work with do is ask a parent or a family member to sign up as a joint borrower and maximise their borrowing potential.
They know that their base salary at the moment might only be £38,000 but in three or four years, that base salary is going to be £90,000. So a doctor might obtain a mortgage for a property that’s above what they’d be able to borrow today, knowing full well they will be comfortable to remove their parent or relative from the mortgage in the near future.
From a lender’s point of view, if you’re an NHS junior doctor you’re on a strong career trajectory. As long as your credit score is good, which most will be, you’re probably one of the most secure people to lend money to.
How do you prove your income if you are a doctor, and how much can you borrow?
If you’re an NHS doctor or an employed doctor, it’s very simple. You will just need to provide your last three to six months’ payslips and perhaps your P60. You may also need to supply your employment contract outlining your increments of pay, base pay and shift pattern. Income is very easy to prove if you’re NHS employed.
If you’re further on in your career and doing both NHS work and maybe some private or self-employed work it can become more complex. Maybe you’ve moved into General Practice and now are an owner or partner. You will potentially then be at the point where you are doing tax returns. If you’re a partner within a Gp practice you will withdraw a small salary plus dividends. Then we move on to needing what used to be called your SA302 tax calculations and tax summary overviews for the last two to three years – that will establish an average, consistent income. That may be needed alongside payslips for NHS contracts.
How much you can borrow will depend on that provable income and how much of that the lender will use. Even if you’re employed and have NHS payslips, you will get different results from each lender on how much you can borrow. They will have different views about how much additional money to take from your shift allowances, so speaking to a mortgage broker is the best way to maximise your borrowing as a doctor.
We’ll take you to a lender that may use 100% of that income, rather than one that will only use 50% of it. Other things that will be factored in include student loans, your pension contributions and any unsecured borrowing you have, such as car finance, credit card debt or personal loans.
The less unsecured debt you have and the more your income, the more you’ll be able to borrow. But again, as your salary progresses you’ll unlock bigger multiples of your income, because the salary is naturally higher.
Do I get mortgage discounts if I work for the NHS or if I’m a doctor?
We deal with a lot of doctors, often helping them buy their first home. If you’re looking for property in more expensive areas, such as London and the home counties, we will potentially look at things like shared ownership.
Here you can buy a share of the property, let’s say 50%, and then rent 50% of the property from a housing association. Overall that’s cheaper than just renting. So you gain ownership of a part of the property and then as your salary escalates as a doctor, you’ll have the ability to buy more of that property via a process called staircasing.
We’ve mentioned things like Help to Buy in the past. This has now ended but we may see another scheme launch in due course. If you are a council or housing association tenant, you also have the Right to Buy, although this is probably something that we come across less with doctors.
What else do we need to consider with Doctor Mortgages?
I would just add that all doctors are on a career path and your position on that journey will set out how complex things are. There are lots of different situations for doctors in terms of getting a mortgage. So it’s really important that you get advice from a mortgage broker that is skilled and experienced in helping doctors obtain mortgage finance.
Your home may be repossessed if you do not keep up with your mortgage repayments.