Doctor Mortgages
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Doctor Mortgages
Peter Stokes talks us through mortgages for doctors.
How do mortgages work for doctors? What’s the process here?
In many ways they work the same – lenders don’t reinvent the wheel. They will look at your income and your outgoings to assess affordability. But there are a number of subtle differences.
One advantage of mortgages for doctors can be that we get enhanced affordability rules. A doctor can perhaps borrow more than someone with the same level of income in a different profession.
But a disadvantage is that doctors can have very complicated-looking incomes to the untrained eye. Even a lot of lenders’ underwriters will struggle to grasp how a doctor’s income works.
We don’t see doctors in the job centre looking for work. Earning is not a problem for them. There’s a shortage of doctors in the country – yet trying to educate lenders to understand their income can sometimes be a little bit challenging.
Why can it be difficult for doctors to get a mortgage? Is it because of that complex income?
There are some other issues as well, but income is the main one. We also have to differentiate between types of doctor. The most obvious is a doctor within the NHS where, until you reach consultant level, your contract is ever-changing. You’re often on rotation – perhaps a three-year fixed term contract but working at three different hospitals for 12 months in each.
That can be a challenge with lenders. If you started a contract two years ago but you’ve only been at this hospital for three months, alarm bells will be ringing for them.
Doctors will have a basic salary plus additional duty rates or banding levels under various different names. Lenders assume that this income is not guaranteed, because it’s not under basic salary. Doctors will know that these are guaranteed earnings, but a lender might not accept the whole amount.
It’s also not unusual for an NHS doctor to do extra hours as a locum. That is a variable source of income where lenders want to see a 12 month history – not understanding that locum work is freely available to NHS doctors.
How do mortgages work for GPs?
GPs can be employed, which is a lot easier, but there are also self-employed GPs and Partners. If you’re self-employed, most lenders want two or three years’ income history.You could be a GP that joined a practice as a partner three months ago. You have probably replaced a doctor who has retired or left. Their share of the practice profits can quite easily be tracked back for two or three years – but trying to get a lender to understand that can be quite complicated.
A further income issue is where consultants start private practice and earn a self-employed income on top of their NHS salaries.
Lenders can be a little flexible on that and may not enforce their normal two or three year rules. There are lots of other things that can make it complicated, such as multiple jobs or perhaps foreign national doctors don’t have indefinite leave to remain. I’ve been doing this for 30 years, so fortunately I know a lot about doctors’ incomes.
How does high levels of student debt affect a doctor’s ability to get a mortgage?
Generally, student debt isn’t a huge issue. You can have a large amount of debt, and the lenders don’t really concentrate too much on the amount. It’s more about the monthly payment – which, of course, is linked directly to how much you earn.It’s not unusual to see student loan payments of £200 a month. Whether you owe £2,000 or £22,000 shouldn’t make too much difference.
That £200 commitment is going to be brought into the affordability calculations. If you don’t have many other credit commitments, then we wouldn’t expect a student loan to change how much you can borrow.
If you have a £200 a month student loan payment, a £300 a month car loan and £10,000 sitting on your credit card, that’s probably going to start reducing what you can borrow. Generally, student debt is probably the most attractive form of debt to a lender. It has got you into the professional capacity you’re in, so it’s not really an issue.
What impact do short term contracts have on a mortgage application for a doctor?
Until you get to consultant level, most doctors will be on fixed term contracts of two or three years – normally three – and you might rotate between hospitals.Lenders have fixed term contract rules. These might look at how long you have been working on a fixed term contract or how long is left on your current contract. They don’t grasp that NHS doctors’ fixed term contracts are more for the benefit of the doctor, not the NHS Trust they’re working for.
As your career progresses, you move up the salary scale and qualification scale. You don’t take a permanent specialist registrar job, because you won’t be a specialist registrar permanently. We have to educate lenders on that. If we present it correctly it’s not a problem. We point out that there is never a gap between contracts – they are for the doctor’s benefit.
How does complex income affect a doctor’s chances of securing a mortgage?
We’ve covered off the additional programme duties – that’s probably the most common one we see. But multiple incomes can be a factor too. It’s not unusual to see a doctor on a fixed term contract with additional programme duties, who is also doing 10 hours a week of locum work.That locum work may appear on their payslip from the employer, or they might get separate payslips from a different NHS Trust. Locum work is generally treated like a zero hour contract – you might not work one month and then do lots of hours the next.
Because it’s a variable income, it’s unlikely we can ever get the lender to use all of it. Some may if there’s a 12 month history, but a few might accept less than that. They will look at a three month average, tax year to-date or a twelve month average.
Don’t start hammering the locum work three months before a mortgage application to try and get your income up, as it won’t have that effect.
The other aspect is private practice income, once you get to consultant level. That comes under self-employed rules, normally, so you need two to three years proof of income. But we’ve got cases through where the client hasn’t even finished the first year. Some lenders do understand that a private practice income isn’t the same as a bricklayer’s.
That’s especially true if you’ve got, for example, an anaesthetist joining an established group, so the income stream comes on much more quickly. That group has a history of earning at a certain level. Different things might put you outside of the norm.
Why might a history of moving affect a doctor’s mortgage application?
Doctors move far more frequently than any other profession, because of those fixed term contracts. You might be working at one hospital in Manchester and then your next contract takes you to Birmingham.When a lender underwrites a mortgage, part of that decision is made by a computer, which will look at how many addresses you’ve had in the last three years. That’s a key factor. If you’ve had one address in the last ten years, you will get more points in the credit score process than if you’ve had three addresses in the last three years.
It won’t necessarily mean a mortgage is declined, but the credit score can be a little bit tighter. The same thing applies for job history. If you’ve been in your job for 10 years you’ll get more points. A doctor’s already at a negative start, then, with the credit scoring process. The flip side is that as a doctor you’re classed as a professional, which carries a lot of points.
So being a doctor has negative and positive effects on the credit score. If you come along for a mortgage and you’ve had five addresses in the last three years there’s not much we can do about it. It is what it is, and we will be able to find a mortgage to suit you.
How do professional mortgages help doctors in the mortgage application process?
[podcast recorded in February 2024] It’s interesting – a few years ago the two went hand in hand but there is a bit of a divergence now. Professional mortgages are a strange product, because certain lenders out there lend more to professionals under certain qualifying criteria – but then charge you a higher interest rate. I never quite understood that.Now, with interest rates having risen so much over the last two years, lenders have been less able to offer enhanced income multipliers. Affordability has become stricter. Today, lenders offering enhanced income multiples to non-professionals probably now offer better mortgage products than those old professional products.
But some lenders do understand professionals, and are still a great help. With professional products not so readily available now, a broker that specialises in professionals becomes much more important.
What are the benefits of using a specialist broker for a doctor’s mortgage application?
A specialist broker knows where to go to get enhanced affordability or enhanced underwriting through normal lenders and normal products – and these are often priced a little bit better.I’ve worked on doctors mortgages for more than 30 years and I’m still learning every day. A broker that understands doctor mortgages can make a huge difference to any doctor buying property, especially first time buying doctors.
The major lenders don’t necessarily have a grasp on how doctors’ incomes, contracts and careers work. A broker with some influence over those lenders can get things through that perhaps wouldn’t normally be accepted.
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What credit score considerations should a doctor keep in mind when applying for a mortgage?
The frequency of job changes and house moves can be an issue as we talked about, but there’s not a lot you can do about that.
In terms of more general criteria, maintaining your bank account and credit card well is important. Having a credit card is better than not having one, but using it a little bit each month and paying off in full is the best indicator to any lender.
A customer might have a £5,000 credit card limit but they’re putting £500 on it each month and paying it off. They have a responsible attitude to credit. Make sure you keep your voters’ roll information up to date if you do move frequently. Credit agencies track that and lenders will use that information.
All these things will help when the computer applies its risk algorithm to make sure you are a risk that they would like to take on.
Why is being on the electoral roll important when applying for a mortgage as a doctor?
The electoral roll information is important because it’s an anti-fraud measure. I might say I live at 27 Acacia Avenue, but they can’t find me on the voters roll. They don’t find any negative information there either. I may be masking the fact that I live at 33 The High Street where there are a ton of County Court Judgements.
So lenders want to find you. If they can prove where you live, they have a far greater degree of trust in the credit information that appears against your name.
They can also see the voters roll information over a period of time, to check there aren’t any gaps. They know the credit profile they are searching is likely to cover that minimum three year period.
It’s important to keep that electoral roll information up to date. Even if you expect to be in temporary accommodation for three months, go on the electoral roll at your parents’ address – or anything to ensure there’s no gaps.
What are the visa requirements a doctor needs to consider when applying for a mortgage?
Medical professions employ a higher than average number of foreign nationals on skilled working visas. We do see a number of these applications.
You may have dual nationality, and once you’ve got indefinite leave to remain it’s not a problem. If you don’t have a definite leave to remain, so you’re working on a visa, you can only borrow up to 75% Loan to Value – so you need a 25% deposit.
The options are very good now. Each lender will have unique criteria. Some might look at how long you’ve lived and worked in the UK. Some might check how long is left on your current visa, and some might have criteria relating to both of those.
We do have a couple of options that will potentially go up to 90% Loan to Value if you don’t have indefinite leave to remain, so you can have a 10% deposit. It limits the choice, but it is still doable. Once we know a client’s details – say they have been here for three years and have two years left on their visa – we know which lenders to approach.
How can a doctor prove their financial health when applying for a mortgage?
Your payslips are your main record for an NHS doctor. Sometimes NHS HR departments are not the best in the world. I often see something on one payslip, then a pay correction on the next one… and it can take three or four months to get the pay actually right. So the sooner you can sort those problems out, the better.
If we have three months’ payslips showing the same amount in basic salary and the same amount in additional programme duties, that’s a huge help. There will be far less arguing with lenders.
From a locum doctor point of view, doctors are extremely busy. I will often see a locum with £1,000 income one month, nothing the next month and £2,000 the next month. I’ll assume they didn’t work that middle month – but the doctor just didn’t get time to put the invoice in.
The more regular and consistent that locum income is, the happier the lender will be. If it’s spiking up and down they can’t treat it as regular.
On the self-employed side, get your tax returns done as soon as possible. The previous tax year ends in April, and legally you won’t get penalised for not submitting your tax return until 31 January the next year. But from September onwards, if you want a mortgage the lender would insist on having that tax return – even though you don’t have to have submitted it. They won’t work off tax calculations that are more than 18 months old.
I appreciate that if you’re a GP partner you can’t do your tax return until the practice accounts are done – but that’s equally as important. The sooner those accounts are done, the better. Once you have your tax return we can use that income for mortgage applications.
What mortgage options do doctors have?
The mortgage options in terms of rates are pretty much the same as for any customer. You don’t tend to see professional mortgages or doctor mortgages where you get better rates. You might get enhanced underwriting or a greater borrowing amount.
Just saying you’re a doctor gives you a lot of points on the credit score process. You are a professional person and lenders like those, because your income is consistent and there’s less chance of breaks in employment.
Can I get a Buy to Let mortgage as a doctor?
Absolutely. Buy to Let mortgages are based predominantly on the value of the property and the rental income that it generates. There is still a credit score process, so all the things we’ve just discussed will help with that.
There’s no reason at all why a doctor cannot get a Buy to Let. In fact, if anything it’s probably easier, as there are often minimum income requirements with lenders. Doctors will easily fit those.
With some Buy to Lets you can even get something called Top Slicing where, if the rental income is not quite enough, they will look to your earned income to help get the mortgage through.
If I have bad credit as a doctor, how will that affect me getting a mortgage?
Bad credit will always affect your options, but it depends on the severity. We’ll always try a high street lender first. If you were late on a credit card payment two and a half years ago, that’s unlikely to be a problem for a high street lender.
If we start getting into greater degrees of bad credit – defaults, County Court Judgements, IVAs or bankruptcy – that’s definitely going to affect your ability to get a mortgage.
Bad credit won’t stop you getting a mortgage, but it might push you into the secondary market of lesser known lenders. Unfortunately these are the ones with much bigger fees and rates. But as a professional doctor, you carry extra points in a credit score.
There is an argument that a self-employed builder who missed a credit card payment two and a half years ago might get a decline, but a doctor in the same situation might go through – purely because being a professional got them those extra few points.
What advice and guidance do you have for doctors who are saving for or buying their first home?
It’s much the same as for standard borrowers – the bigger the deposit you have, the better, so save hard for that deposit. If you are a First Time Buyer you’ve got the option of using tax efficient vehicles like the Lifetime ISA – that will help your deposit, presuming you’re going to be buying under the limits of those.
Try and keep your payslips in order, and get any errors sorted out as soon as you can. If you’re a locum, file your invoices regularly to show that continuity of income and get your tax returns done.
But deposit is really the key thing. It’s much better to speak to a mortgage broker before you find a house. Let’s see if what you’re looking to do is possible. We might even tell you that you could go higher – which you might be very pleased about. Knowing what your options are before you start viewing properties is always the best way to do it.
What else do we need to know about Doctor mortgages?
We work with a lot of high net worth clients in various different professions, but I would say that doctors are one of the most complex in terms of income. This is probably one of the most searched for terms on Google, how to get a doctor mortgage.
A specialist broker who knows the medical professions well is unbelievably helpful. If you ever approached a lender on your own, you could be pulling your hair out – they won’t use part of your income, they’re knocking it down a lot or they’ve got a problem with your contract.
But a specialist broker will know which high street lenders can do it, which ones can’t and which one we might be able to lean on a little bit. That will definitely improve your chances of getting potentially a bigger mortgage and certainly the best rate possible.
So do use a mortgage broker and, as a doctor, find a broker that specialises in the medical profession.
Your home may be repossessed if you do not keep up with your mortgage repayments.
