How to get a mortgage as a new law partner
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Mortgages For Professionals with complex incomes through the main high street lenders
High street lenders typically provide more appealing rates, making them the preferred choice for many professionals seeking mortgage solutions. However, navigating the complexities of professional incomes can present challenges in securing loans from these lenders.
Professionals often assume they must seek alternative lenders due to the intricacies of their income streams. Yet, armed with a deep understanding of various payment structures, we confidently facilitate successful mortgage applications with high street lenders.
In fact, a substantial 93.4% of our mortgage applications are seamlessly processed through reputable high street lenders, showcasing our expertise in navigating complex income scenarios.
How to get a mortgage as a new law partner
Peter Stokes talks about how to get a mortgage as a new law partner.
Can I get a mortgage as a newly qualified partner?
Yes. As a lawyer or solicitor you’ve probably spent some time on an employee basis, perhaps with the same firm, but not necessarily. You’ve then moved on and become a partner.
There are two types of scenario here, depending on whether it’s quite a small firm or a larger one, where you may be on a set profit share, or your percentage ownership of the firm is quite small. Often we work with partners who have less than 1% share.
In either example, it’s not a problem at all to get a mortgage. It has to be done slightly creatively and with the right lenders, but it’s not difficult. If you suddenly have 30% ownership of a partnership, we have to be a little bit more careful. It would depend on the individual circumstances, but it’s certainly not out of the question.
How long do I need to be a partner before I can use my new income for a mortgage?
As per the last question, if it’s a small minority ownership stake within the partnership, in theory you could possibly do it before you even get the partnership, with the right documentation from the firm’s accountant.
If it’s a larger shareholding, it depends on the circumstances. Obviously the practice may well have been trading for some time, and perhaps we can demonstrate to lenders that you are taking the place of a previous partner. In that case, they can still look at the profits and it doesn’t really change anything.
If the partnership is diluted by adding another partner, though, that’s where it becomes a little more difficult. In that instance, you would probably need one full year’s figures behind you as a partner. We might be able to do it without, but ideally you’d want at least one, preferably two years.
Can I factor in annual bonuses for a mortgage?
I would suspect annual bonuses would probably apply more whilst you’re still employed. If you’re employed, they can absolutely be used. Normally you need at least one, if not two years worth of history of that.
If we’re talking about minority partners with small partnership stakes, you could be on a fixed profit share, but then at the end of the year there’s a further division of profits. Again, these can be used. We might need a year or two’s proof of those, very much like the employed annual bonus.
If you’re a larger partner, your income is variable anyway, and it doesn’t really split into basic and bonuses. That’s why you need a longer history.
How much can I borrow for a mortgage as a law partner?
If you’re employed as a solicitor, it’s not out of the question to get five, five and a half times, or maybe even six times your income.
Lenders are still not as supportive of the self-employed, which as a partner you would be. The general rule is that you can get a multiple of four to 4.5 in this situation.
Depending on the fit, the amount you will be earning and the size of your deposit, we could push that out to five. Some lenders may go up to six times for employed professionals on a First Time Buyer basis. But that is a bit more difficult as a partner.
Of course, you may take the view that now you’ve got to partner, your income will jump up and you’re where you want to be – you can probably still borrow more than when you were employed, but it’s a smaller multiple of your income.
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What deposit do I need for a mortgage as a law partner?
Nothing different from normal. The minimum deposit is normally 5%. However, a partner in a law firm is likely to have quite a sizable income, and the mortgage required may be fairly large.
If you go over £500,000, you generally start to need a 10% deposit. As you move higher still, you may need even more.
If you’re buying a flat, some lenders will restrict flat lending and you might need a 10% deposit there too. So the simple answer is 5%, but in certain circumstances possibly more.
Why are interest only mortgages popular for law and equity partners?
It’s an individual decision. If we feel interest only is right for you, and you meet the tougher requirements for an interest only mortgage, there is usually a reason why it might be more attractive.
Often, if you’re buying into a practice you may have to hand over money, or they may lend you a sum. Basically, you’re building up an equity stake, so that when you retire or leave that practice, there can be a lump of cash coming back your way.
You could use that to future sum to keep your mortgage cheap in the meantime, and use it to clear some or all of your mortgage at the end of the term. You would need to be confident that it’s going to produce enough money.
It’s like having a stake in any business – once you sell that stake, you get that cash back. If you’ve had a repayment mortgage, that money’s all yours to do with as you wish – or, you may have kept your mortgage outgoings lower and now need to use that money to clear the mortgage debt, without having to sell the property.
How do I get a better mortgage as an equity partner? Any top tips?
The longer you’ve been a partner, the easier it becomes. As is the case with any profession and any mortgage, the easier it is, the more choice of lenders you have, which means you’re more likely to get the right rates in the market.
Like I said, we can’t always get mortgages for those who’ve just become a partner. But if you’ve been a partner for a while, it’s easier and you could get a better rate.
A top tip for anybody – not just solicitors and lawyers who are partners in a firm, but for anyone who’s self-employed – is to keep your accounts up to date. Lenders won’t work off your most recent figures if they are more than 18 months old.
Once you get six months past your year end, you’ll be expected to produce your most recent year’s accounts. If you haven’t done them, you simply can’t get a mortgage. So keep on top of your tax affairs and your accounts.
Obviously, that might be out of your control, because your personal tax affairs will be determined by the partnership accounts. But as soon as the partnership accounts are done, you can do your personal tax return which makes it easier to get a mortgage.
How can a mortgage broker help with mortgages for a new law partner?
Working with any broker that specialises in certain professions has to be an advantage. We certainly help everyone from trainee solicitors all the way up to senior partners. We know all these roles very well.
If you’re just becoming a partner, it’s not ideal timing to get a mortgage – but it’s not impossible. I understand exactly why you might want one, too, because you’ve suddenly hit the big time with your income. It’s jumped up a lot and you’d like to get that bigger and better house.
I totally understand that and we can absolutely do it. Because that becomes more complicated, it’s good to have a broker by your side who understands your profession, knows which lenders can do it and how to present it to them.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.